Bruce E. Hansen c 2000, 20101

University of Wisconsin

www.ssc.wisc.edu/~bhansen

This Revision: January 10, 2010

Comments Welcome

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This manuscript may be printed and reproduced for individual or instructional use, but may not be printed for commercial purposes.

Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

vi

1 Introduction

1.1 What is Econometrics? . . . . . . . . . . . .

1.2 The Probability Approach to Econometrics

1.3 Econometric Terms and Notation . . . . . .

1.4 Observational Data . . . . . . . . . . . . . .

1.5 Standard Data Structures . . . . . . . . . .

1.6 Sources for Economic Data . . . . . . . . .

1.7 Econometric Software . . . . . . . . . . . .

1.8 Reading the Manuscript . . . . . . . . . . .

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2 Regression and Projection

2.1 Introduction . . . . . . . . . . . . . . . .

2.2 Notation . . . . . . . . . . . . . . . . . .

2.3 Conditional Mean . . . . . . . . . . . . .

2.4 Regression Error . . . . . . . . . . . . .

2.5 Best Predictor . . . . . . . . . . . . . .

2.6 Conditional Variance . . . . . . . . . . .

2.7 Homoskedasticity and Heteroskedasticity

2.8 Linear Regression . . . . . . . . . . . . .

2.9 Best Linear Predictor . . . . . . . . . .

2.10 Regression Coe¢ cients . . . . . . . . . .

2.11 Best Linear Approximation .

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