Course Syllabus - Emory University



ECON 422 Economic Forecasting

Course Syllabus

Fall 2015

Course Description and Objectives

Forecasting the future is a fundamental aspect of decision making in any business or government. Since economic and business conditions vary over time, business and government leaders must find ways to keep abreast with the effects that such changes will have on their operations. For instance, a business executive is especially concerned with such key decision variables as the future sales, profits, stock prices; while a government official may worry about the future rates of inflation/unemployment, and the levels and the time paths of the GDP. Thus, a comprehensive knowledge of the forecasting process is necessary and vital to a company’s success and to a better economic environment of a country.

This course is designed to cover the forecasting process and the techniques in order to prepare you adequately in accordance with the growing need for such skills in real-world. We will first start with econometric theories behind the techniques. You will learn how to examine the data and how to prepare data prior to forecasting. Various useful forecasting techniques will be introduced to improve the quality of forecasting. By the end of the semester, you will be equipped with essential forecasting techniques and knowledge on how to perform a good forecasting. With an emphasis on applications, the ultimate goal of this course is to help you develop a solid understanding of how to extract information from data. For successful course work, you should have a good understanding of introductory statistics. You should be conversant with basic statistical concepts and symbols pertinent to the discussion of time-series analysis and forecasting. Having additional background knowledge of econometrics would be helpful.

Exams, Assignments, and Grades

1. EXAMS

1) There will be two 90 minute-long midterms on Oct 7 (W) and Nov 18 (W). The two midterm exams account for 50% of your course grade. Of the two exams, the best score will account for 30%, and the other score will account for 20%. Midterm exams and NOT cumulative.

2) Your final exam is CUMULATIVE and accounts for 35% of your final grade. The final exam is scheduled on Friday, December 11 from 3:00-5:30 PM. (Location TBA)

3) All tests are based on my lecture materials.

2. TEST ADMINISTRATION and GRADES

1) Make-up exams are NOT offered in any cases.

2) A student arriving late to an exam session will not be allowed to take the exam if other examinees have left before the student arrives.

Course grades will be determined on the basis of your relative performance in the class. Your course work requires

|Two midterm exams (50%) |

|Final Exam (35%) |

|Homework Assignments (10%) |

|Class Participation (5%) |

|Total 100% |

3. ASSIGNMENTS

There will be 3~5 homework assignments. No late submissions will be accepted for any reason. (You can submit it early.) Homework assignments will be applications of the material you learn in class. All assignments must be submitted as a single Word document. Make sure to make your file PC-compatible. You will need to upload your file on Blackboard.

Course Website and Contact Information

The course website is Blackboard. You will be able to download word or PDF version of course materials (including syllabus, assignments, class ppt slides, handouts, and answers for exercise questions, etc.) from Blackboard. I can be reached via email at smialon@emory.edu. In most cases, talking in person is a much more efficient way to actually get you the explanation you need than emailing.

E-mail

I will frequently use “course email” on Blackboard as my primary means of out-of-class communication with you. Often, I will post important announcements on blackboard and e-mail the announcement using course email. Thus, you are expected check your email regularly every day between Sunday and Thursday.

Statistical Package: STATA 13

Computer application of course materials is an integral part of this course. As much as possible, we will use the STATA statistical program to practice the forecasting techniques that we learn in class.  I will often show how to run a specific forecasting technique in STATA in class. I strongly recommend that you purchase your own STATA 13 program and install it in your laptop computer so that you can duplicate step-by-step computing processes in class that I show. (STATA 13/IC version for students is $69 for 6 months, $98 for 1 year. See )

TENTATIVE COURSE SCHEDULE

|By |Topic |Chapters in Diebold. |NOTE |

|1st week 8/26 |What is forecasting? |1 |8/26: Class begins |

| | | | |

|2nd week |Review of Statistics |handouts |9/2: Schedule change ends |

|3rd week |Linear Regression model |handouts | |

| | | | |

|4th week |Methods and principles in Forecasting, Graphical |2,3 | |

| |analysis |4 | |

| |Modeling Trends |5 | |

| |Model Selection | | |

|5th week |Modeling Seasonality |6 | |

| |Covariance Stationary series | | |

| |White Noise, Lag operator |7 | |

|6th week |MA/AR models | | |

|Oct 7 (W) |CH 1-7, MA/AR models | |1st midterm exam |

| |10/12-10/13 | |Fall Break |

|9th week |ARMA Models |7 | |

| | | | |

| | | | |

| | | | |

|10th week |ARMA models, ARMA Diagnostic checking |8 | |

| |Test of ARMA models |10 | |

|11th week |Forecasting Cycles | | |

| |Forecasting with Regression Models | | |

|12th week |VAR | | |

|Nov 18 (W) |Ch 7,8,10 | |2nd Midterm |

|15th week |Stochastic Trends and Random Walk Models |13 | |

| |Unit Root, ARIMA models | | |

| |Test, Smoothing | | |

| |ARCH, GARCH models | | |

| |Evaluating Forecasts | | |

|Dec 8 (T) | | |Last class day |

| | | | |

|Dec 11 (F) |Final Exam 3:00-5:30PM |cumulative | |

* This schedule is tentative. It may change depending upon the speed of class. [pic]

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REQUIRED TEXT: Elements of Forecasting

By Francis X. Diebold, 4th Edition. A free electronic copy of the book is available on the author’s webpage:



PREREQUISITES : ECON 220 (STATISTICS) +

MY OFFICE: Rich Memorial Bldg #333

COURSE WEB PAGE: Blackboard

MY OFFICE HOURS : Mondays & Wednesdays 1:00-2:00 PM,

Wednesdays 10:00-11:00AM

E-MAIL: smialon@emory.edu

Tentative Course Materials

1. Reviews of Statistics and Econometrics

A. Statistical Review

B. Simple and Multiple Regression

C. Econometric Modeling: Time-Series Modeling and Cross-Sectional Modeling

D. Model Evaluation

2. Forecasting: Overview (Handouts)

3. Forecasting with Classical Regression Methods: Least Squares Prediction, Cross-Sectional Forecasting (Ch 2, See any Econometrics textbook)

4. Time-Series Modeling and Data Generating Process (DGP) (Ch 3,4)

A. Time-Series

B. Stationary Data, Nonstationary Data

C. Time-Series Forecasting Process, Diagnosis, Modeling and Model Selection Criteria, and Forecast Model Selection, AIC, BIC, MSE

5. Time-Series Decomposition (Handouts)

A. Trend (Ch 5)

B. Seasonality (Dummy Variables) (Ch 6)

6. Time-Series Forecasting: ARMA (Box-Jenkins) Models (Ch 7, 8, 13)

A. MA (q) model and Correlogram

B. Autocorrelation (AR(p)) and Correlogram

C. ARMA (p,q)

D. ARIMA (p, d, q)

7. Vector Autoregressions (VAR)

8. Unit Roots (Ch 13)

9. Conditional Volatility: ARCH models

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