A Concise Introduction To Econometrics: An Intuitive Guide

This page intentionally left blank A Concise Introduction to Econometrics In this short and very practical introduction to econometrics Philip Hans Franses guides the reader through the essential concepts of econometrics. Central to the book are practical questions in various economic disciplines, which can be answered using econometric methods and models. The book focuses on a limited number of the essential, most widely used methods, before going on to review the basics of econometrics. The book ends with a number of case studies drawn from recent empirical work to provide an intuitive illustration of what econometricians do when faced with practical questions. Throughout the book Franses emphasizes the importance of specification, evaluation, and implementation of models appropriate to the data. Assuming basic familiarity only with matrix algebra and calculus, the book is designed to appeal as either a short stand-alone introduction for students embarking on an empirical research project or as a supplement to any standard introductory textbook. P H I L I P H A N S F R A N S E S is Professor of Applied Econometrics and Professor of Marketing Research at Erasmus University, Rotterdam. He has published articles in leading journals and serves on a number of editorial boards, and has authored several textbooks, including Non-Linear Time Series Models in Empirical Finance (2001, with Dick van Dijk). A Concise Introduction to Econometrics An Intuitive Guide
Philip Hans Franses Econometric Institute, Erasmus University, Rotterdam           The Pitt Building, Trumpington Street, Cambridge, United Kingdom    The Edinburgh Building, Cambridge CB2 2RU, UK 40 West 20th Street, New York, NY 10011-4211, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia Ruiz de Alarcón 13, 28014 Madrid, Spain Dock House, The Waterfront, Cape Town 8001, South Africa http://www.cambridge.org © Philip Hans Franses 2004 First published in printed format 2002 ISBN 0-511-04272-8 eBook (netLibrary) ISBN 0-521-81769-2 hardback ISBN 0-521-52090-8 paperback Contents List of figures page vii List of tables viii Preface ix 1 Introduction 1 What is econometrics? Why this book? Outline of the book 1 7 11 2 A few basic tools 13 Distributions The linear regression model Inference Some further considerations To summarize 14 19 24 30 33 3 Econometrics, a guided tour 36 Practical questions Problem formulation Data collection Choice of an econometric model
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37 39 46 62 Contents Empirical analysis Answering practical questions 4 Seven case studies 66 77 81 Convergence between rich and poor countries Direct mail target selection Automatic trading Forecasting sharp increases in unemployment Modeling brand choice dynamics Two noneconomic illustrations 5 Conclusion 82 86 89 93 97 101 108 Always take an econometrics course! Econometrics is practice 108 110 References 111 Index 115
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