ECON 497C
Forecasting
Spring 2005

Instructor:

Professor Herman J. Bierens
Office: 510 Kern.
Email: hbierens@psu.edu
Office hours: Wednesday 2-4 PM, and by appointment.

Teaching assistant:

Hosin Song
Office: 407 Kern.
Email: hus111@psu.edu
Office hours: Wednesday 4-5 PM.

Time and place:

Tuesday & Thursday 1-2.15 PM in 216 Thomas

Goal

The goal of this course is to teach the students how to forecast time series, using econometric software, and what kind of models are useful for that purpose.

Prerequisite level

I will build further upon what you have learned in ECON 490. If you have not passed ECON 490 (or an equivalent level statistics course) you cannot take ECON 497C.

Required textbook and course material

Homework

Each week I will assign homework of numerical and empirical nature, and occasionally of (mild) theoretical nature. Homework assignments are designed to improve your understanding of concepts and help prepare you for exams. Homework assignments must be submitted in class. Homework submitted by email will not be accepted. No late homework will be accepted.

Software

Most homework assignments will require the use of econometric software. You may use whatever statistical or econometric computer software package that you are familiar with. Several are available on the network, such as Stata and E-Views. However, I will use my own free software EasyReg International for demonstrations in class. EasyReg (= Easy Regression) is a Windows based software package, which can be freely downloaded from my EasyReg web site. As the name indicates, EasyReg is very easy to use (just point-and-click), and comes with a wide range of web based guided tours.

Grading

The course grade will be based on the homework (50%), a written midterm exam (25%), and a written final exam (25%). The final exam is cumulative. The large share of the homework in the final grade indicates the hands-on nature of this course. The homework has to be done individually. Turning in copied homework as your own is a breach of academic integrity (see below). Doing the homework assignments is mandatory. If you skip a homework assignment without a valid excuse (see below) then each time the missing homework will be graded zero. If you do all the homework seriously and your score on the final exam is higher than on the midterm exam then the midterm score will be ignored and the final exam will count for 50%. Otherwise your grade will be based on a weighted average of the homework and exam scores.

There will be no make-up midterm exam. If you miss the midterm exam without valid excuse then your score on this exam will be zero, and the favorable arrangement above will not apply. If you have a valid excuse for missing the midterm exam, the final exam will count for 50%.

Course outline

  1. How to use EasyReg International.
  2. Review of regression analysis, with applications to conditional forecasting [Lecture notes on bivariate and multivariate regression; paper]
  3. Key features of time series [PHF: Ch. 2]
  4. Introduction to time series regression analysis, with applications.
  5. The Box-Jenkins ARIMA approach to time series modeling and forecasting [PHF: Ch. 3]
  6. Deterministic and random trends, and how to distinguish them. [PHF: Ch. 4]
  7. Seasonal time series. [PHF: Ch.5]
  8. Modeling volatility of financial time series. [PHF: Ch. 7]
  9. Forecasting multivariate time series.

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