MG205 syllabus 2021 PDF

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BSC Management 2021/2022

MG205 Econometrics: Theory and Applications Course Syllabus

This syllabus contains most of the information students will need for this course. Please read it very carefully and keep it for future reference.

Lecturer: Class Teachers:

Teaching team Jordi Blanes i Vidal ([email protected]). Antonin de Leaver ([email protected]), Diogo Salgado-Baptista ([email protected]) Ledia Pelivani ([email protected])

Course Description This course is an introduction to the quantitative techniques guiding evidence-based managerial decision-making. Management is the act of allocating resources to specific activities in order to maximise the performance of firms and other organisations. Successful management therefore requires understanding how the world functions. For instance, are family-managed firms less productive than other firms? Are there biases in job interviews? Are political connections important for corporations? Does performancepay increase productivity? This course provides the tools to investigate empirically whether these statements are supported by empirical evidence. In other words, this course develops a comprehensive framework that students can use to examine whether the predictions of managerial, social and economic theories are supported by empirical evidence. At an abstract level, the course will provide students with the tools to address questions such as: • • • • • •

When can we conclude that A causes B? How is evidence abused in the public debate? When is it sufficient to know that A is correlated with B? How certain should we be of our empirical conclusions? When are the results of a study externally valid? How should we read a graph?

The approach is somewhat formal, as the course makes extensive use of econometric theorems and techniques. However, it is also unusually grounded in real-world applications. Students will be provided with tools and data sets to answer highly relevant

questions. Many applications will be illustrated using the STATA software package, and the students will be expected to learn the basics of data manipulation and regression running. The theoretical topics covered are: o Topic 1: Review of Maths and Stats o Topic 2: The Linear Regression Model o Topic 3: Multiple Regression o Topic 4: Inference o Topic 5: Functional Form o Topic 6: Limitations of Linear Regression o Topic 7: Experiments o Topic 8: Exploiting Time Variation o Topic 9: Instrumental Variables The specific applications (labelled ‘Empirical Exercises’, or EE) that the students will tackle in detail include: EE1: Family Firms (are family firms better managed than non-family firms?) EE2: Lottery Prizes and Peer Effects (are richer people happier? are people less happy when their neighbours are richer?) • EE4: Inequality (are unequal societies worse?) • EE7: Daughters (are people affected by their children?) • EE8: Newspapers and Government Advertising (are newspapers reluctant to alienate their advertisers?) • EE9: Beauty (why are beautiful people more successful?) • EE10: TV and Political Persuasion (are voters persuaded by media messages?) • EE11: Discrimination (are African Americans discriminated against?) • EE12: Death Penalty (does the death penalty deter crime?) • EE13: Lobbyists (how important are connections to politicians in the lobbying industry?) • EE14: Female Committees (are female evaluators softer or tougher on female candidates?) • EE15: Counterinsurgency (did the US win ‘hearts and minds’ in Iraq?) We will aim to cover all these empirical exercises, but in special circumstances may leave behind a small number of them. • •

Intended Learning Outcomes By the end of the course students will be able to: • Understand the possibilities and challenges in using quantitative data to learn about the world • Be immune to statements and theories supported by insufficient or defective empirical evidence

• •

Mathematically prove simple econometric theorems and propositions Use the STATA econometric package to manipulate data, run regressions and interpret the resulting output

Structure and Content of the Sessions – ‘Flipping the Classroom’ The lectures in this course will be delivered online through a set of pre-recorded videos available on the MG205 Moodle page. Each topic has been divided into a number of parts. For each part, the lecturer has recorded a video explaining the corresponding material. After each part, students are provided with a set of exercises that they can use to reinforce the learning of the material. Each exercise also has its corresponding video, in which the lecturer explains the solution to the exercise. Students are expected to cover the online videos in the course according to the Course Schedule Table below. The scheduled weekly ‘lecture’ time (Thursdays 11-13 MT, Fridays 9-11 LT) will not be used to introduce new concepts, but instead to revise the concepts from that week’s online videos. The structure of these sessions will be as follows: - The lecturer will review the most important concepts from that week (approximately 20-30 minutes) - The lecturer will answer questions about concepts or exercises from that week - (If there is time) the lecturer will answer questions about concepts or exercises from previous weeks Note that these sessions will not be recorded. These scheduled sessions play the role of the lecturer’s office hours, although in addition students can ask questions via Moodle (see below). Class teachers will have their separate office hours. Students will meet their class teacher for weekly one-hour classes. Some students may not present on campus (because they arrive late or because they are quarantining). These students will instead have online/hybrid class meetings with their class teacher. We will improvise these adjustments as circumstances demand. Moodle MG205 makes a special use of Moodle, so it is very important that students familiarise themselves with it. The enrolment key is: PanchoVilla Moodle Forums There are two forums on the Moodle page, where students can ask questions. One of them is for administrative questions, and the other is for questions about content of the course. We will try to respond promptly, but this will depend on availability of the staff of the course.

Readings and Course Material

Lecture Slides and Videos: Electronic (pdf) copies of the lecture slides will be posted on the course’s Moodle web page. Students will also be able to find links to the videos where the lecturer explains the corresponding material on the Moodle page. Lecture Exercises and Videos: Every section of the lecture slides is accompanied by a set of exercises, available as electronic (pdf) documents. After finishing watching the videos of each section, students will be invited to solve these exercises. Students can then consult the solutions both in electronic (pdf) as well as video form. Class Exercises: Some of the one-hour weekly classes will be devoted to the discussion of Class Exercises, according to the Course Schedule Table. The class teachers may decide to cover only some of the exercises in a particular class, but the students will always be able to find the solutions to all the exercises via Moodle. Empirical Exercises: As outlined earlier, students will use the techniques in the course by studying a number of specific questions about the real world. For this purpose, the lecturing team has created a number of documents outlining the questions, the theories on both sides of the debate, the difficulty to answer the questions through casual observation, etc. These empirical exercises should be studied very carefully. In particular, any element in them can appear as a question in the exam. The exam is expected to contain several questions related to the empirical exercises. Note that some empirical exercises will be covered online by the lecturer, while others will be covered in the classes. Every Empirical Exercise consists of two PDF documents (one introducing the exercise and another discussing the solutions), one or more datasets (.dta) and a .do file including the code necessary to explore the data. The empirical exercises covered online will also include a corresponding video. Course textbook(s): There is no textbook that covers all the issues in this course. The best thing to do for students that find the lecture slides insufficient is to use a combination of Stock and Watson (4rd Ed.) and Wooldridge (7th Ed.). The details of these books are: • James H. Stock and Mark W. Watson, Introduction to Econometrics, Fourth Edition. 2020. • Jeffrey M. Wooldridge, Introductory Econometrics - A Modern Approach, Seventh Edition, South-Western, 2020. The relevant pages for each topic are provided below. Assessment Final Exam: the 3-hour exam during the Summer Term will consist of 18 short questions, equally weighted. STATA/Empirical Exercises Questions: students can be asked to interpret the output generated by STATA. Students will not be explicitly asked to write STATA commands. However, interpreting the STATA output obviously requires some minimum level of familiarity with the STATA programming language. For those students that have been

studying the Empirical Exercises over the academic year, this should be very straightforward. Mathematical Questions: some questions may involve having to provide an algebraic proof. Every step is expected to be explicitly written down. Formative Assessments: This will take the form of students handing in their answers to the class exercises for Topic 5 (Week 10 MT) and Topic 9 (Week 8 LT). The class teachers will mark the answers and give feedback to the students. Email Policy Emails to the lecturer and/or class teachers will only be answered when they deal with questions related to the logistics of the course and they are not covered in this syllabus. Students sending emails with questions related to the academic material should not expect their questions to be answered. The Moodle forum is the proper venue for questions related to academic material. Students are alternatively strongly encouraged to attend the revision sessions with regard to any academic question that they may have.

Letter of Reference Policy Occasionally, students apply for additional education that may ask for letters of reference. The policy of the course leader in this respect is to only provide letter of reference to those students who he has observed throughout the course as actively contributing to his sessions. If you anticipate needing a reference some years into the future, and fear that the course leader may have forgotten you by then, please contact him in the Summer Term of your Academic Year. Extra Information for General Course Students Every year, a number of General Course students, often coming from the US, choose to take this course. We welcome them with open arms. At the same time, there are a number of issues that these students may want to keep in mind if they are a General Course student and are thinking of joining. 1. Firstly, these students should make sure that their mathematical and statistical background is up to scratch. BSc Management students have taken MA107 and ST107, and in principle should be ready for MG205. If their background is not as strong they may want to reconsider or alternatively work incredibly hard during the first part of the course. 2. Secondly, the teaching team may be asked to evaluate these students’ performance in the classes (this depends on the specific program that is taken in their original university). This will be carried out by evaluating both the class attendance and, especially, the contributions of the students during the classes.

3. Thirdly, it is important that General Course students keep in mind that marking in MG205 does not suffer from the grade inflation sadly prevalent in other countries. Note that it is possible to fail this course. Every year a non-insignificant number of students do so, despite the great efforts of the teaching team. At the same time, it is also possible to get a very high grade (even in the 80s or 90s).

TEXTBOOK READINGS PER TOPIC Note: the pages provided below are only approximate. You may find some concepts there that are not covered in the course. Use your judgement and refer back to the lecture videos when necessary. Stock & Watson 4th edition

Wooldridge 6th edition

1

Chapter 2 (pp. 55-84), Chapter 3 (pp. 103-120), Chapter 8 (288-296).

Chapter 2 (pp. 37-40) Appendix A (pp. 666-683), Appendix B (pp. 684-711), Appendix C (pp. 714-720)

2

Chapter 4 (pp. 143-164; 172-175), Chapter 5 (pp. 188-193)

Chapter 1 (pp. 1-14), Chapter 2 (pp. 20-36; 40-50)

3

Chapter 6 (pp. 211-235)

Chapter 3 (pp. 66-102)

4

Chapter 3 (pp. 103-120), Chapter 5 (pp. 178-186), Chapter 7 (pp. 247-259)

Chapter 4 (pp. 117-136; 139-149)

5

Chapter 5 (pp. 186-188), Chapter 8 (pp. 277-316)

Chapter 6 (pp. 186-195), Chapter 7 (pp. 220-239)

6

Chapter 5 (pp. 188-193), Chapter 6 (pp. 211-217), Chapter 9 (pp. 330-344)

Chapter 3 (pp. 84-86), Chapter 8 (pp. 262-267), Chapter 9 (pp. 308-321)

7

Chapter 13 (pp. 474-498)

8

Chapter 10 (pp. 361-381), Chapter 13 (pp. 490-495)

Chapter 13 (pp. 426-431; 439-446), Chapter 14 (pp. 462-469)

9

Chapter 12 (pp. 427-460)

Chapter 15 (pp. 495-511)

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