Econometric Modelling

ECONOMETRICS
Bruce E. Hansen c 2000, 20101

University of Wisconsin

www.ssc.wisc.edu/~bhansen
This Revision: January 10, 2010
Comments Welcome

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This manuscript may be printed and reproduced for individual or instructional use, but may not be printed for commercial purposes.

Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

vi

1 Introduction
1.1 What is Econometrics? . . . . . . . . . . . .
1.2 The Probability Approach to Econometrics
1.3 Econometric Terms and Notation . . . . . .
1.4 Observational Data . . . . . . . . . . . . . .
1.5 Standard Data Structures . . . . . . . . . .
1.6 Sources for Economic Data . . . . . . . . .
1.7 Econometric Software . . . . . . . . . . . .
1.8 Reading the Manuscript . . . . . . . . . . .

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1
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3
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6
7

2 Regression and Projection
2.1 Introduction . . . . . . . . . . . . . . . .
2.2 Notation . . . . . . . . . . . . . . . . . .
2.3 Conditional Mean . . . . . . . . . . . . .
2.4 Regression Error . . . . . . . . . . . . .
2.5 Best Predictor . . . . . . . . . . . . . .
2.6 Conditional Variance . . . . . . . . . . .
2.7 Homoskedasticity and Heteroskedasticity
2.8 Linear Regression . . . . . . . . . . . . .
2.9 Best Linear Predictor . . . . . . . . . .
2.10 Regression Coe¢ cients . . . . . . . . . .
2.11 Best Linear Approximation .

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