MG205      One Unit
Econometrics: Theory and Applications

This information is for the 2025/26 session.

Course Convenor

Availability

Requisites

Pre-requisites:

Students must have completed MA107 and ST107 before taking this course.

Simple and Multiple Regression; Hypothesis Testing; Mechanics and Limitations of OLS; Causality; Natural, Field and Laboratory Experiments. Panel Data and Fixed Effect Models. Instrumental Variables Regression.
The main aim of this course is to provide a thorough understanding of the quantitative techniques which guide evidence-based managerial decision-making. It seeks to develop a framework in which students can examine whether the predictions of managerial, social or economic theory are supported by empirical evidence. Particular emphasis is made on (a) illustrating the many ways in which evidence is abused in the academic or managerial debate, and (b) trying to establish causality in the relationship between variables. The approach is both formal, as the course makes extensive use of econometric theorems and techniques, and solidly grounded in intuition, as it provides numerous examples of tests of real-life relations. Many of these examples will be illustrated using the STATA software package, and the students will be expected to learn the basics of data manipulation and regression running. A solid base of introductory statistics and probability (equivalent to that provided by ST107) and introductory algebra and calculus (equivalent to that provided by MA107) will be expected.

20 hours of lectures and 10 hours of classes in the Winter Term.
20 hours of lectures and 10 hours of classes in the Autumn Term.

This course has a reading week in Week 6 of Autumn and Winter Term.

In its Ethics Code, LSE upholds a commitment to intellectual freedom. This means we will protect the freedom of expression of our students and staff and the right to engage in healthy debate in the classroom.

Students will be expected to produce 1 problem sets in the AT and 1 problem sets in the WT.

There will be two formative assessments, one in the last week of each term. During lecture time, the students will be given a shorter exam and an hour to complete it. The lecturer will then discuss the answers in the second hour of the lecture. The exams will be marked and given back to the students.

The textbook for the course is:

• James H. Stock and Mark W. Watson, Introduction to Econometrics, Second Edition, Pearson, 2007.

Two other very useful (complementary) books are:

• Christopher Dougherty, Introduction to Econometrics, Third Edition, Oxford University Press, 2007;
• Jeffrey M. Wooldridge, Introductory Econometrics - A Modern Approach, Third Edition, South-Western, 2006.

Exam (100%), duration: 180 Minutes in the Spring exam period