University of Texas at Dallas

School of Management
MEco 7320 Professor Yexiao Xu
Advanced Econometrics Spring 2005

Course Syllabus

Course Objectives:
Quantitative skills have become increasingly important in many field of science. Econometrics
provides horsepower in economics to deepening our understanding of economic theory and
facilitates policy implementation. In order for the course to be self-contained, some of the materials
will overlap with an introductory course you might have taken. However, this course puts more
emphases on econometrics theory and extends in two dimensions. First, there will be more rigorous
treatment on the classical topics such as the Gauss-Markov theorem and relaxation to basic
assumptions underlying the theorem. This is important since no practical econometric problems are
exactly the same. In your future creative research, you will likely to build your own theory and be
able to test it using your econometric skills. You will also be able to read academic journals on the
new development of econometric theory that can be applied to your field. Second, we will cover
additional topics, such as nonlinear regression, GMM, two stage estimation method, limited
dependent variable model, unit root testing, ARCH and GARCH models, Bayesian estimation, etc.
The course should not only provide a solid understanding of these techniques and theory, but also
enable you to expand your econometrics skill on your own or through additional reading of current
econometrics journals. Therefore, a thorough understanding of econometric theory is crucial
towards a successful completion of this course. Homework problems will be assigned for each new
topic discussed in order to enhance your understanding and provide “hands-on” experience with the
techniques and computer software.

Texts:
ECONOMETRIC ANALYSIS, fifth Edition, William H. Greene

References:
Johnston, J. and John DiNardo, Econometric Methods
Judge and Hill, TheTheory and Practice of Econometrics
Maddala, Limited-Dependent and Qualitative Variables in Econometrics
James D. Hamilton, Time Series Analysis
Pagan and Ullah, Nonparametric Econometrics

Course Requirements:
You need to have graduate level of statistics course (e.g. Stat 5311) or equivalent and introductory
econometrics course (e.g. Meco 6320) in order to sign up for this course. There will be one lecture
(Monday 9:30-12:15) per week. In addition, I will hold my office hours on Monday from 5:00PM to
6:30PM, or by appointment. My office is located in SM3.812 on the new School of Management
Building. I can be reached by phone at ×-6703 or by email at yexiaoxu@utdallas.edu.

Like any other quantitative courses, it is crucial to understand theory by doing exercise. Therefore,
homework assignments are mandatory. As a Ph.D student, you need to allocate your time wisely.
No late homework will be accepted, and there is no makeup exam. Data used in the problem sets can
be downloaded from my website: http://www.utdallas.edu/~yexiaoxu . You also need to have
working knowledge of any statistical software. From my experience, I strongly recommend you
using GAUSS, or MATLAB. You can download MATLAB from the P: network drive and installed
in you office PC. Here is a good site to get you started on MATLAB
http://spicerack.sr.unh.edu/~mathadm/tutorial/software/matlab/vector.html . You may also want to
look at the following link http://www.indiana.edu/~statmath/math/matlab/links.html . There will be
one midterm and a final plus regular problem sets. The grading breakdown is as follows:

Homework 30%
Midterm (I) 30%
Final 40%

Course Outline:
Jan 10 Course Organization and Background Review
Lecture 1 Linear algebra, matrix theory, asymptotic theory, parameter estimator, statistical
distribution, useful theorem
Appendix: A, B, C, and D

Jan 17 Martin Luther King Day

Jan 24 Classical Multiple Linear Regression Model

Lecture 2 Model Assumptions, Different estimators, Least square estimator and properties,
asymptotic normality, partitioned regression model restrictions, consequence of
misspecifications, and multicollinearity
Chapter: 3.1-3.5, 4.1-4.5, 4.6, 4.8, 5.2, and 8.2

Jan 31 Relaxing Assumptions in the CLRM

Homework #1 due in class
Lecture 3 Stochastic regressor, instrumental variables, Error in variables, non-spherical error,
heteroskedasticity, autocorrelation, generalized least square
Chapter: 4.5, 5.3-5.4, 5.6, 10.1-10.3, 10.5, 11.2, 11.4-11.5, 12.3-12.5, and 12.7-
12.9

Feb 07 Maximum Likelihood Estimator

Lecture 4 Maximum likelihood estimator and properties, quasi-maximum likelihood estimator,
two-step MLE, maximum simulated likelihood estimation, nonlinear regression
Chapter: 17.1-17.4, 17.6 .2,17.7-17.9, 9.2-9.3, and 9.5

Feb 14 Statistical Inferences

Homework #2 due in class
Lecture 5 Testing linear and non-linear restrictions, LR test, LM test, and W test, structural
break and stability, Hausman test, nonnested hypothesis testing, White tests for
misspecification
Chapter: 4.7, 5.5, 6.1-6.5, 7.4-7.5, 8.3-8.4, 9.4, and 17.5
Feb 21 Generalized Method of Moments
Lecture 6 Method of moments, generalized method of moments, properties of GMM, testing
hypotheses in GMM, applications
Chapter: 181-18.4, 10.4, 11.3, 12.6

Feb 28 Multivariate Regression and Simultaneous Equations

Homework #3 due in class
Lecture 7 SUR estimation, pooled data, identification, 2SLS, 3SLS, FIML
Chapter 13.9, 14.2, 14.4, and 15

Mar 07 Spring Break

Mar 14 Midterm Exam

Mar 21 Nonparametric Regression

Lecture 8 Density estimation, kernel estimator, conditional moment estimation, semi-
parametric regression
Chapter: 16.3-16.5 and supplemental materials

Mar 28 Times Series Models

Homework #4 due in class
Lecture 9 Kalman filter, Vector Auto-Regression, unit root
Chapter 19.6 and 20.1-20.3

Apr 04 Co-integration and ARCH Models

Lecture 10 Granger causality, Co-integration and error correction, Auto-Regressive Conditional
Heteroscedasticity, GARCH
Chapter: 11.8, 19.4, 20.4

Apr 11 Panel Data and Discrete Dependent Variable

Homework #5 due in class
Lecture 11 Fixed and random effects, random coefficients, dynamic panel, probit and logit
model, polychotomous variables
Chapter: 13.3-13.8, 21.1-21.4, 21.6 21.7-21.8

Apr 18 Limited Dependent Variables

Lecture 12 Truncated regression, censored regression
Chapter 22.1-22.4

Apr 25 Introduction to Bayesian Estimation

Homework #6 due in class
Lecture 13 Bayes Rule, sampling theory, MCMC

May 02 Final
 University of Texas at Dallas
School of Management
MEco 7320 Professor Yexiao Xu
Advanced Econometrics Spring 2005

About Yourself

In order for me to better organize the course, and to adapt the materials to your background,
would you please tell me more about yourself?

Your Name ___________________________

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Your Background

Econometrics Class _________________________________________________________

Statistics and Math Courses __________________________________________________

Economics Class ___________________________________________________________

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