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Syllabus
Winter 2013
Office hours: MF 1112;
Eric Zivot
348 Savery Hall
5436715 Last
updated: February 25, 2013
Note: The following
topics will be covered during the course. The order of the topics, however,
may change. I will indicate in class the topics to be covered during a given
week.
Large Sample Theory
 The Law of Large Numbers (LLN) and consistency of
estimators
 The Central Limit Theorem
(CLT) and asymptotic normality of estimators
 Asymptotics for nonlinear functions of estimators (delta method)
 Asymptotics for time series
 Applications to the linear regression model
 Evaluating asymptotic approximations: Monte Carlo
simulations and the bootstrap
Readings
 Hayashi, F. (2000). Econometrics, chapter 2,
sections 15.
 Hall, A. (2005). Generalized
Method of Moments, chapter 1, section 4.
 Greene, W. (2003).
Econometric Analysis, Appendix D.
 Lafaye de Micheaux, P. and Liquet, B. (2009). "Understanding
Convergence Concepts: A VisualMinded and Graphical SimulationBased
Approach," The American Statistician, Vol. 63(2), 173178.
 Zivot, E. (2013).
Lecture notes (primer on
asymptotics). Updated: January 7, 2013.
 Zivot, E. (2013).
Class slides part 1 (LLNs and
CLTs). Updated: January 14, 2013.
 Zivot, E (2013).
Class slides part 2. (Time
series Concepts). Updated: January 14, 2013.

Zivot, E (2013).
Class slides part 3.
(Hypothesis Testing). Updated: January 13, 2013

Zivot, E (2013). Tablet PC notes for lecture 1

Zivot, E (2013). Tablet PC notes for
lecture 2

Zivot, E (2013). Tablet PC notes for
lecture 3

Zivot, E (2013). Tablet PC notes for lecture
4
Programs and
Examples

asymptotics.r. R script file illustrating
consistency and asymptotic normality

asympoticsPrimerPowerPoint.pdf.
Powerpoint examples. Updated: September 23, 2008.
GMM
for Single Equation Linear Models
 Endogeneity in econometric models
 Single equation linear GMM
 Large sample properties
 Hypothesis testing
Readings: Theory
 Hayashi, F. (2000). Econometrics, chapters 3
 Hall, A. (2005). Generalized
Method of Moments, chapter 2.
 Zivot, E. (2013).
Class slides on single equation
linear GMM estimation. Updated: January 23, 2013.
 Zivot, E. (2013).
Class slides on
hypothesis testing in single equation linear GMM. Updated: January 30,
2013.
 Zivot, E. (2010).
Class slides on GMM examples. Updated:
October 27, 2010.
 Zivot, E. and J. Wang (2006).
Modeling Financial Time Series with SPLUS, 2nd Edition,
chapter 21 "Generalized Method of Moments" ,
sections 15.
 Greene, W. (2003).
Econometric Analysis, chapter 10, section 4.
 Newey, W. (1985). "Generalized method of moments
specification testing," Journal of Econometrics, 29, 229256.
 Newey, W. and West, K. (1987). "Hypothesis testing
with efficient method of moment estimators," International Economic
Review, 28, 777787.
 Hall, A. (1999). "Hypothesis
Testing in Models Estimated by GMM," chapter 4 in Matyas (ed.)
Generalized Method of Moments.

Zivot, E (2013). Tablet PC notes for
lecture
5

Zivot, E (2013). Tablet PC notes for
lecture
6

Zivot, E (2013). Tablet PC notes for lecture
7
Readings:
Applications
 Zivot, E. and J. Wang (2006).
Modeling Financial Time Series with SPLUS, 2nd Edition,
chapter 21 "Generalized Method of Moments", sections 45.
 Blackburn, M. and D. Neumark
(1992). "Unobserved Ability, Efficiency Wages, and Interindustry
Wage Differentials, Quarterly Journal of Economics, 107, 14211436.
 Campbell, J. and G. Mankiw
(1990). "Permanent Income, Current Income, and Consumption," Journal of
Business and Economic Statistics 8, 265279.
 Griliches, Z. (1976). "Wages of
Very Young Men," Journal of Political Economy, 84, S69S85.
 Baum, C.F., M.E., Schaffer, and
S. Stillman (2003). "Instrumental Variables
and GMM: Estimation and Testing, The Stata Journal, 3(1), 131.
 Cliff, M. (2003). "GMM and MINZ
Program Libraries for Matlab":
gmm.zip, minz.zip,
gmmdoc.pdf.
 Kostas Kyriakoulis's
GMM Toolbox
for MATLAB.
 Chausse, P. (2009). "Computing
Generalized Empirical Likelihood and Generalized Method of Moments with
R".
GMM with Serial
Correlation
 Stationary time series and the
Wold decomposition
 LLNs and CLTs for linear time
series processes
 Heteroskedasticity and
autocorrelation consistent covariance matrix estimation
Readings: Theory
 Hayashi, Econometrics,
chapter 6 (especially section 6)
 Hall, Chapter 3, Section 5.
 Zivot, E. (2013).
Class slides on GMM with serial
correlation. Updated: February 4, 2013.

Zivot, E (2013). Tablet PC notes for lecture
8
Readings:
Applications
 Bekaert, G., and R. Hodrick
(1993). "On Biases in the Measurement of Foreign Exchange Risk Premiums,"
Journal of International Money and Finance, 12, 115138.
Nonlinear GMM
 Nonlinear GMM
 Computation
 Examples
 Extremum estimators
 Consistency
 Asymptotic Normality
 Hypothesis testing
Readings: Theory
 Hayashi, Econometrics,
chapter 7
 Hall, A. (2005). Generalized
Method of Moments, chapter 1, sections 13; chapter 3; chapter 5.
 Zivot, E. (2013).
Class slides on nonlinear GMM.
Updated: February 11, 2013.
 Zivot, E. (2010).
Powerpoint
examples. Updated: November 8, 2010.
 Zivot, E. (2013).
Class slides on asymptotics in
nonlinear GMM. Updated: February 13, 2013.
 Greene, W. (2003).
Econometric Analysis, chapter 18.
 Hansen, L. and K. Singleton (1982), "Generalized
instrumental variables estimation of nonlinear rational expectation
models," Econometrica.

Newey, W.K. and D. McFadden
(1994). "Large
Sample Estimation and Hypothesis Testing", Chapter 36 in Handbook
of Econometrics, Volume IV, Edited by R.F Engle and D.L. McFadden.
Readings:
Applications
 Hall, A. (2005). Chapter 9.
 Zivot, E. and J. Wang (2006).
Modeling Financial Time Series with SPLUS, 2nd Edition,
chapter 21 "Generalized Method of Moments" ,
sections 6 and 7.
 Chausse, P. (2009). "Computing
Generalized Empirical Likelihood and Generalized Method of Moments with
R".

Cliff,
M. (2003). "GMM and MINZ Program Libraries for Matlab".
 Chen, C., and P. Knez (1996).
"Portfolio performance measurement: theory and application," Review of
Financial Studies, 9, 51159.
 Harvey, C. (1991). "The world
price of covariance risk," Journal of Finance, 46, 11157.
 Melino, A., and S.M. Turnbull
(1990). "Pricing foreign currency options with stochastic volatility," Journal
of Econometrics, 45, 23966.
 Eichenbaum, M. (1989). "Some
empirical evidence on the production level and production cost smoothing
models of inventory adjustment," American Economic Review, 79,
85364.
 Ogaki, M. (1999). "GMM
Estimation Techniques," chapter 8 in Matyas (ed.) Generalized Method of
Moments.
 Mankiw, G., J. Rotemberg, and L. Summers (1985), "Intertemporal
substitution in macroeconomics," Quarterly Journal of Economics.
Programs and
Examples
Maximum Likelihood
Estimation
 Definition of MLE
 Finite sample properties
 Asymptotic properties
 Comparison with GMM
Readings: Theory
 Hayashi, Chapter 1, Section 5
(revised version); Chapter 7
 Zivot, E. (2009).
Lecture notes on maximum likelihood.
Updated: November 23, 2009.
 Zivot, E. (2013).
Class slides on maximum likelihood. Updated:
February 20, 2013.
 Zivot, E. (2011).
Class slides on testing in maximum
likelihood. Updated: February 25, 2013.
 Buse,
A. (1982). "The Likelihood Ratio, Wald, and Lagrange Multiplier
Tests: An Expository Note", American Statistician.
MultiEquation
Linear GMM
 General Multiequation framework
 Special cases: SUR, 3SLS
 Panel data
 Random effects
 Fixed effects
 Dynamic panel data models
Readings: Theory
 Hayashi, F. (2000). Econometrics,
chapters 4 and 5
 Zivot, E. (2006).
Class slides on multiequation
linear GMM. Updated: November 21, 2011.
 Zivot, E. (2006).
Class slides on examples of
multiequation linear GMM. Updated: November 21, 2011.
 Zivot, E. (2006).
Class slides on GMM with panel data.
Updated: November 28, 2011.
 Zivot, E. (2006).
Class slides on GMM estimation of
dynamic panel data models. Updated: November 30, 2011.

Zivot, E (2009). Tablet PC notes
for lecture 16

Zivot, E (2009). Tablet PC notes
for lecture 17
 Ray, S., Savin, N.E., and Tiwari, A.
(2009) "Testing CAPM Revisited".
 Arellano, M. and S. Bond (1991).
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an
Application to Employment Equations," Review of Economic Studies,
58, 277297.
Readings:
Applications
 Mankiw, G., D. Romer, and D.
Weil (1992). "A Contribution to the Empirics of Economic Growth,"
Quarterly Journal of Economics, 107, 407437.
 Islam, N. (1995). "Growth
Empirics: A Panel Data Approach," Quarterly Journal of Economics,
110, 11271170.
GMM
with Weak Instruments
 Motivating examples
 StaigerStock weak instrument asymptotics
 Weak instrument robust hypothesis tests
Readings: Theory
 Zivot, E. (2006).
Class slides on instrumental
variables with weak instruments. Updated: December 5, 2011.
 Staiger, D. and Stock, J.H. (1997). "Instrumental
variables regression with weak instruments," Econometrica, 65,
557586.
 Zivot, E., Startz, R., and Nelson, C.R. (1998). "Valid
confidence intervals and inference in the presence of weak instruments,"
International Economic Review.
 Wang, J. and E. Zivot (1998). "Inference on
structural parameters in instrumental variables regression with weak
instruments," Econometrica, 66(6), 13891404.
 Kleibergen, F. (2002). "Pivotal statistics for
testing structural parameters in instrumental variables regression,"
Econometrica, 70, 17811803.
 Moreira, M. (2003). "A conditional likelihood ratio
test for structural models," Econometrica, 71(4), 10271048.
 Stock, J. H. , J. Wright, and M.
Yogo (2002). "A Survey of Weak
Instruments and Weak Identification in Generalized Method of Moments
", Journal of Business and Economic Statistics.
 Andrews, D.W.K. and J.H. Stock
(2005). "Inference with Weak Instruments," Cowles Foundation Discussion
Paper.
 Kleibergen, F., and Mavorides (2009). "Weak
Instrument Robust Tests in GMM and the New Keynesian Phillips Curve,"
Journal of Business and Economic Statistics, 27(3), 293311.
Readings:
Applications
 Angrist, J.D., and A.B. Krueger
(1991). "Does Compulsory School Attendance Affect Schooling and Earnings?"
Quarterly Journal of Economics 106, 9791014.
Final Exam
