ASB-4101

RESEARCH METHODS

Semester Two 2016/17

Lectures: John Goddard

Tutorials: Christina Phillips

Module description
The main components of the module are as follows:
1.
2.
3.
4.

Probability theory
Estimation and statistical inference
Correlation and regression analysis
Further topics in regression analysis

Learning objectives
This module provides an introduction to statistical and econometric methods that are used to
model financial data. Although the main emphasis is on practice rather than theory, a
sufficient theoretical grounding is provided to enable you to develop a critical awareness of
the strengths and weaknesses of the modelling techniques that are employed. You will
develop the independent capability to design and estimate appropriate statistical econometric
models using the Stata software package.
Textbook and readings
The following textbooks are recommended for this module:
Brooks, C. (2014). Introductory econometrics for finance, 3rd ed. Cambridge University
Press.
Gujarati, D.N. (2009). Basic econometrics, 5th ed. McGraw-Hill.
Newbold, P., Carlson, W.L. and Thorne, B. (2012). Statistics for business and economics, 8th
ed. Pearson.
Stock, J.H. and Watson, M.W. (2014). Introduction to Econometrics, 3rd ed. Pearson.
Verbeek, M. (2012). A guide to modern econometrics, 4th ed. Wiley.
Lecture notes
A full transcript of the lecture slides will be made available on Blackboard, in Word and pdf
format. The site will update as the module progresses.
Teaching methods and schedule
There will be one 2-hour lecture per week, and one 1-hour tutorial per week from Week 3
onwards. Exercises will be posted on Blackboard in advance of the tutorials, and solutions
will be discussed during the tutorials. The exercises will include use of the Stata software
package. Attendance at all sessions is compulsory. The lecture and tutorial schedule is subject
to change, but every effort will be made to give adequate notice of any rescheduling. Please
check your university email account regularly for messages.

Assessment
The overall mark for this module will be determined by means of coursework (contributing
40%) and a written examination at the end of the session (contributing 60%). The exercises
covered during the tutorial sessions will be very relevant but will not formally count towards
the assessment. The coursework assignment will be set during March 2017. The submission
date is Tuesday 2 May 2017.
Other information
The module is designed to be accessible and useful to students of all levels of mathematical
background and ability. Please feel free to come and ask for help if you are having difficulties
with the material.
John Goddard
January 2017
Email: j.goddard@bangor.ac.uk

MODULE CONTENTS
1.

Probability theory
Rules of probability
Discrete and continuous random variables
Measures of central tendency and dispersion
Probability density function and distribution function
The binomial and Poisson distributions
The normal distribution
Jointly distributed random variables: marginal and conditional distributions
Covariance, correlation and independence
Newbold ch 3,4,5
Stock and Watson ch 2
Gujarati Appendix A
Verbeek Appendix B

2.

Estimation and statistical inference

Sampling and estimation
Sampling distributions of the sample mean and sample variance
Hypothesis tests concerning one population parameter
Hypothesis tests comparing two population parameters
Other useful hypothesis tests: contingency tables, one-way ANOVA
The power of a hypothesis test
Newbold ch 6,7,9,10,14,15
Stock and Watson ch 3
Gujarati Appendix A

3.

Correlation and regression analysis

Sample correlation coefficient: estimation and statistical inference
The two-variable linear regression model
The multiple regression model
Ordinary least squares and maximum likelihood estimation
Statistical inference and hypothesis testing
Newbold ch 11,12
Stock and Watson ch 4-7
Gujarati ch 1-8
Brooks ch 3,4
Verbeek ch 2,3

4.

Further topics in regression analysis

Discrete choice regression models: logit and probit regression
The Heckman sample selection model
Ordered probit regression
Models for panel data: pooled, within (fixed effects) and between models
Random effects regression
Choosing between fixed effects and random effects
Brooks ch 11,12
Stock and Watson ch 10,11
Gujarati ch 15,16
Verbeek ch 7,10