CCOMSATS Institute of Information Technology, Lahore

Department of Management Sciences

COURSE HANDBOOK
1 Course Title Econometrics Theory and Applications
2 Course Code ECO501
3 Credit Hours 3(3,0)
4 Program & Batch
5 Semester Semester 5- Fall 2017
6 Resource Person
7 Contact Hours 3 Hours per week
8 Office & Counseling Hours
9 Email

10 Course Introduction

Econometrics is a set of research tools used to estimate and test economic relationships This is a very challenging
course, which introduces some basic econometric models commonly used in applied economics. Applications
of these models to empirical examples will be illustrated with the use of the econometric package E-Views.
The methods taught in this introductory course can also be employed in the business disciplines of accounting,
finance, marketing and management and, in many other social science disciplines.
This course focuses on techniques for estimating regression models, on problems commonly encountered in
estimating such models, and on interpreting the estimates from such models. The goal of the course is to teach
you the basics of the theory and practice of econometrics and to give you experience in estimating econometric
models with actual data.

11- Prerequisites
It is expected that all the students have taken the courses; Principles of Economics (covering Microeconomics and
Macroeconomics), Mathematical Economics, and Statistics. It will be assumed that all students have a good
command of the material taught in these courses. It is strongly suggested that you review this material at the
beginning of this course.
12 Learning Objectives
The aim of this course is to provide you with the skills helpful in filling the gap between being a student of economics
and, being a practicing economist. By taking this Basic Econometrics you will gain an overview of what
econometrics is about, and develop some intuition about how things work. The emphasis of this course will be on
understanding the tools of econometrics and applying them in practice. It is expected that this course will provide
students with a basic foundation in econometric theory combining theoretical knowledge with practical problems.
By the end of the course, students should be able to apply econometric techniques with E-Views software to various
types of datasets.

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13Weekly Division of the Course
Weeks Topic of Lecture D.N.Gujrati
Introduction
 What is Econometrics? ,Why a separate discipline?
Week1  Methodology of Econometrics, Types of Econometrics Chapter 0
 Mathematical and Statistical Prerequisites
 The Role of the Computer
Single Equation Regression Models; The Nature of Regression
Analysis
 Historical Origin of the Term Regression
Week 2  The Modern Interpretation of Regression
 Statistical versus Deterministic Relationships Chapter 1
 Regression versus Causation & Regression versus Correlation
 The Nature and Sources of Data for Economic Analysis
Two-Variable Regression Analysis ; Some Basic Ideas
 A Hypothetical Example
Week 3  The Concept of Population Regression Function (PRF) Chapter 2
 The Meaning of the Term Linear, Stochastic Specification of PRF
 The Significance of the Stochastic Disturbance Term
 The Sample Regression Function (SRF)
Two-Variable Regression Model; The Problem of Estimation
 The Method of Ordinary Least Squares
Week 4  The Classical Linear Regression Model
 Precision or Standard Errors of Least Squares Estimates
 Properties of Least-Squares Estimators: The Gauss-Markov Theorem, Chapter 3
The Coefficient of Determination r2:A Measure of “Goodness of Fit”
Classical Normal Linear Regression Model (CNLRM)
 The probability Distribution of Disturbances 𝑢𝑖
Week 5  The normality assumption for 𝑢𝑖 Chapter 4
 Why the normality?
 Summary and conclusions
Week 6 First Sessional Examination
Students Week……. No Class work

Week 7
Week 8 Two-Variable Regression: Interval Estimation and Hypothesis Testing
 Statistical Prerequisites, Interval Estimation: Some Basic Ideas
 Confidence Interval for Regression Coefficients β1 and β2
 Confidence Interval for Ϭ2
 Hypothesis Testing : General Comments Hypothesis Testing : The Chapter 5
Confidence Interval Approach, The Test of Significance Approach

 Hypothesis Testing : Some Practical Aspects

Week 9  Regression Analysis and Analysis of Variance Chapter 5
 Application of Regression Analysis : The Problem of Prediction
 Reporting the Results of Regression Analysis
Evaluating the Results of Regression Analysis

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 Extensions of the Two –Variable Linear Regression Model
 Regression through the Origin
 Scaling and Units of Measurement
Week 10  Regression on Standardized Variables Chapter 6
 Functional Forms of Regression Models
How to Measure Elasticity : The Long-Linear Model
 Semi log Models : Log-Lin and Lin-Log Model
 Reciprocal Models & Choice of Functional Form Chapter 6
Week 11  A Note on the Nature of the Stochastic Error Term
Additive versus Multiplicative Stochastic Error Term
Week12 Second Sessional Examination
Multiple Regression Analysis :The Problem of Estimation
 The three Variable Model : Notation and Assumptions
 Interpretation of Multiple Regression Equation
 The Meaning of Partial Regression Coefficients
 OLS and ML Estimation of Partial Regression Coefficients Chapter 7
 The Multiple Coefficient of Determination R2
Week 13 and the Multiple Coefficient of Correlation R

 Simple Regression in the Context of Multiple Regression : Introduction

to Specification Bias, R2 and the Adjusted R2
 The Cobb Douglas Production Function: More on Functional form, Chapter 7
Week 14 Polynomial Regression Models,
Partial Correlation Coefficients
Multiple Regression Analysis :The Problem of Inference
Chapter 8
Week 15  The Normality Assumption Once Again
 Hypothesis Testing in Multiple Regression: General Comments
 Hypothesis Testing about Individual Regression Coefficients
 Testing the overall Significance of the Sample Regression

 Testing the Equality of two Regression Coefficients

 Restricted Least Squares : Testing Linear Equality Restrictions Chapter 8
Week 16  Testing for Structural or Parameter Stability of Regression Models:
The Chow Test. Prediction with Multiple Regression

Week 17  The Troika of Hypothesis Tests: The Likelihood Ratio (LR),

Wald(W) , and Lagrange Multiplier (LM) Tests Chapter 8
Testing the Functional Form of Regression Choosing between Linear and
Log-Linear Regression Models

Week Terminal Examination

18-19

Please Note: Final Examination will be held from the complete Syllabus

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 15 Course Assessment

The assessment of this module shall have following breakdown structure;

First Sessional Test = 10%

Second Sessional Test = 15%
Quizzes &Assignments(15 +10) = 25%
Terminal Examination = 50%

Assessment Schedule
Week 3 1st Assignment: Please provide detail of assignment
Week 3 1st Quiz
Week 7 2nd Quiz
Week 8 2nd Assignment: Please provide detail of assignment
Week 13 3rdAssignment: Please provide detail of assignment.
Week 13 3rd Quiz
NB: There will be no makeup quizzes. Late submission of assignments will not be acceptable at any case and will result
in zero marks.

The minimum pass marks for each course shall be 50%. Students obtaining less than 50% marks in any course
shall be deemed to have failed in that course. The correspondence between letter grades, credit points, and percentage
marks at CIIT shall be as follows:

Letter
Credit Points Percentage Marks
Grades
A ( Excellent) 4.0 90and above
A- 3.7 85-89
B+ 3.3 80-84
B (Good) 3.0 75-79
B- 2.7 70-74
C+ 2.3 65-69
C (Average) 2.0 60-64
C- 1.7 55-59
(Minimum
D 1.3 50-54
passing)
F (Failing) 0.0 Less than 50
17 Text Book Basic Econometrics;5th Edition by Damodar N. Gujarati & Dawn C. Porter
1- Essentials of Econometrics ,2nd Edition by Damodar N. Gujarati
18 Reference 2- Econometrics , 1st Edition by Samuel Cameron
3- Introduction to Econometrics, Maddala, G.S. (2001).
Books 4- Introduction to Econometrics, Stock J. and Watson M.(2003)
19 Plagiarism

Plagiarism involves the unacknowledged use of someone else’s work, usually in coursework, and passing it off as
if it were one’s own. Many students who submit apparently plagiarised work probably do so inadvertently without
realising it because of poorly developed study skills, including note taking, referencing and citations; this is poor
academic practice rather than malpractice. Some students, particularly those from different cultures and educational
systems, find academic referencing/acknowledgement systems and conventions awkward, and proof-reading is not
always easy for dyslexic students and some visually-impaired students. Study skills education within programmes

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of study should minimise the number of students submitting poorly referenced work. However, some students
plagiarise deliberately, with the intent to deceive. This intentional malpractice is a conscious, pre-mediated form of
cheating and is regarded as a particularly serious breach of the core values of academic integrity.

The Degree Programs have zero tolerance for intentional plagiarism; Plagiarism can include the following:
1. collusion, where a piece of work prepared by a group is represented as if it were the student’s own;
2. commission or use of work by the student which is not his/her own and representing it as if it were, e.g.:
a. purchase of a paper from a commercial service, including internet sites, whether pre-written or
specially prepared for the student concerned
b. submission of a paper written by another person, either by a fellow student or a person who is not a
member of the university;
3. duplication (of one’s own work) of the same or almost identical work for more than one module;
4. the act of copying or paraphrasing a paper from a source text, whether in manuscript, printed or electronic
form, without appropriate acknowledgement (this includes quoting directly from another source with a
reference but without quotation marks);
5. submission of another student’s work, whether with or without that student’s knowledge or consent;
6. Directly quoting from model solutions/answers made available in previous years;
7. cheating in class tests, e.g.
a. when a candidate communicates, or attempts to communicate, with a fellow candidate or individual who
is neither an invigilator or member of staff
b. copies, or attempts to copy from a fellow candidate
c. attempts to introduce or consult during the examination any unauthorised printed or written material, or
electronic calculating, information storage device, mobile phones or other communication device
d. personates or allows himself or herself to be impersonated.
8. Fabrication of results occurs when a student claims to have carried out tests, experiments or observations that
have not taken place or presents results not supported by the evidence with the object of obtaining an unfair
advantage.
These definitions apply to work in whatever format it is presented, including written work, online submissions,
group work and oral presentations.
20 Attendance Policy

 Every student must attend 80 % of the lectures delivered in this course.

 The students falling short of required 80 % of attendance / of lectures shall not be allowed to appear in the
terminal examination of this course and shall be treated as having failed this course.