Economics 323 Business Conditions Analysis Spring 2017 Dr. H. H. Stokes

Economics 323 (Version 15 November 2016)

Business Conditions Analysis

Dr. Houston H. Stokes

722 UH

Web Page www.uic.edu/~hhstokes

TA: Yuhao Chen

Required Text

Business Forecasting, John Hanke, Dean Wichern 9th ed Pearson / Prentice Hall, 2009

Optional References

Data Analysis Using Stata by Ulrich Kohler and Fraunke Kreuter. 3rd Edition, Stata Press, 2012.

Introduction to Time Series Using Stata by Sean Becketti. Stata Press, 2013

A Gentle Introduction to Stata 5th Edition by Alan Acock Stata Press 2016

Introduction to Econometrics by Christopher Dougherty, 4th edition, Oxford University Press, 2011.

Introductory Econometrics: A Modern Approach by Jeffrey M. Wooldridge, 5th edition, 2013, South Western Cengage Learning. This book is a bit expensive but is available from the Library.

“Notes on the Basics of Econometric Modeling geared to Dougherty (2011)" by Houston H. Stokes, is available on-line from the course web page and will be discussed in class. See file

Preliminary_Notes.docx

“Econometric Notes” by Houston H. Stokes contains some sections on important topics. It also provides an introduction to Statistics. See especially sections 1-3 and 5 which we will initially discuss. This document is available from the course web page. See file

Econometric_Notes.docx

Purpose of Course

The purpose of the course is to extend the student’s knowledge of Business Conditions Analysis by teaching statistical methods of business forecasting. This includes forecasting micro and macro data. Students will run the computer in class and get experience in a number of software systems. Students will be introduced to OLS and GLS analysis, nonlinear estimation of GLS models, recursive residual analysis options to test the stability of the estimated coefficients and simple time series ARIMA models.

Students will be asked to apply their knowledge in number of computer exercises which will be graded and a final exam, which is a take home. The grading will be 2/3 computer exercises and 1/3 open book final or an approved final project. Students can work in teams of two people but must turn in an individual paper with their name on it. If working in a team, be sure and indicate your team member on the cover sheet of your homework. Once a team is formed, it must stay together for the term. Students must have selected their teams by the third week or operate as a "lone wolf" by choice. Students are free to use software of their choosing. Stata and B34S will be discussed in the course as well as some Excel. The goal is to both teach how to do applied economic work and to allow students to list software they can use on their resumes. Students wanting free B34S software systems for their home machines will be allowed to obtain them.

Objectives

The main objective of the course is to give students knowledge that will allow them to apply the economic theory they have learned in other courses in a manner that will both be useful and will facilitate them obtaining a job. Unless economic knowledge is able to be applied, it is of substantially less value and will soon be forgotten. Since forecasting provides a competitive edge, a great deal of emphasis is placed on developing systematic forecasting skills. Systematic forecasting skills are those that can be replicated by others. Many students taking this class in prior years have used their projects in job interviews to illustrate their skills and to differentiate themselves from other job seekers.

Jobs

Since many of you will want to obtain jobs that use your economics training. The best way to make a good impression at the job interview is differentiate your skills from the skills of the other applicants. It has been found that student resumes that stress the fact that they have completed a successful econometric research project in the area of the job may have a "leg up" on those applicants that appears clueless at the interview stage. To achieve this end, students can mention the types of problems they have analyzed and the software they have used on their resumes. The project alternative is in place of the take home final and would be done by each individual student.


Computer Software

For many of you this will be your first time using the computer for serious work apart from the basics you have learned in the required stat courses. It is important that you do not shrink from this aspect of the course. Computer work is exacting and is necessary for research. The problem sets can be run on your own machine or from the labs where it is possible to open the class web pages and cut and paste commands into control files. Many students find it helpful to work together on their computer projects since they will be able to explain to each other what they are trying to do and learn to express themselves. What is important is to discuss results clearly and with understanding. Attaching masses of computer output is NOT a substitute for writing in a clear fashion. In business stress is laid on being clear and specific in what you have found. While many of the problems can be solved using Excel many cannot be solved using this limited software. For this reason we will be using Stata for much of our work.

Stata examples in this document provides a quick introduction to the software and will be discussed in class first to get you up and running. Since this document is on-line, you will be able to cut and paste the control files and get up and running very fast. Using the internet and cut and paste it is easy to run models.

Kohler & Kreuter (2012) provides more Stata detail, if that is needed. A student version of Stata is available from the UIC computer center for a nominal charge or can be accessed from various UIC labs.

Stata is available in SCE408, SELE 2249F, SELE 2249, and BSB 4133.

Students can obtain a copy of Stata that expires on 6/30/2015 for $90.00

https://webstore.illinois.edu/Shop/search.aspx?keyword=Stata

Advanced references that are available for more detail on forecasting as needed.

1.  Chapter 2 of Specifying and Diagnostically Testing Econometric Models Houston H. Stokes, 2nd ed, Quorum Books 1997. Updated version available on line from web page.

2.  Chapter 7 of Specifying and Diagnostically Testing Econometric Models Houston H. Stokes, 2nd ed, Quorum Books 1997 Updated version available on line from web page.

3.  Chapter 9 of Specifying and Diagnostically Testing Econometric Models Houston H. Stokes, 2nd ed, Quorum Books 1997. Updated version available on line from web page.

4.  Stokes (200x) The Essentials of Time Series Modeling: An Applied Treatment with Emphasis on Topics Relevant to Financial Analysis Chapter 2 "Time series modeling objectives" available on line from web page.

5.  Stokes (200x) The Essentials of Time Series Modeling: An Applied Treatment with Emphasis on Topics Relevant to Financial Analysis Chapter 4 "Stationary Time Series Models" available on line from web page.

6.  Stokes (200x) The Essentials of Time Series Modeling: An Applied Treatment with Emphasis on Topics Relevant to Financial Analysis Chapter 5 "Estimation of AR(p), MA(q) and ARMA(p,q) Models" available on line from web page.

Quick Start: To get going assume you have a file of data on the age of 6 cars and their value

age value

1 1995

3 875

6 695

10 345

5 595

2 1795

Your goal is to estimate a model of the form

Your results should show

Value = 1852.9 - 178.41 Age R_2 = .672

(6.45) (-3.35)

which has been discussed in the overview notes on statistics.

A simple Stata setup for this problem is

input x y

1 1995

3 875

6 695

10 345

5 595

2 1795

end

list

summarize

regress y x

which if saved with the name

cars.do

can be is run in batch with the command

stata /e do cars.do

which produces in cars.log

______(R)

/__ / ____/ / ____/

___/ / /___/ / /___/ 12.1 Copyright 1985-2011 StataCorp LP

Statistics/Data Analysis StataCorp

4905 Lakeway Drive

College Station, Texas 77845 USA

800-STATA-PC http://www.stata.com

979-696-4600

979-696-4601 (fax)

Single-user Stata perpetual license:

Serial number: 3012042652

Licensed to: Houston H. Stokes

U of Illinois

Notes:

1. Stata running in batch mode

. do cars.do

. input x y

x y

1. 1 1995

2. 3 875

3. 6 695

4. 10 345

5. 5 595

6. 2 1795

7. end

. list

+------+

| x y |

|------|

1. | 1 1995 |

2. | 3 875 |

3. | 6 695 |

4. | 10 345 |

5. | 5 595 |

|------|

6. | 2 1795 |

+------+

. summarize

Variable | Obs Mean Std. Dev. Min Max

------+------

x | 6 4.5 3.271085 1 10

y | 6 1050 679.5219 345 1995

. regress y x

Source | SS df MS Number of obs = 6

------+------F( 1, 4) = 11.24

Model | 1702935.05 1 1702935.05 Prob > F = 0.0285

Residual | 605814.953 4 151453.738 R-squared = 0.7376

------+------Adj R-squared = 0.6720

Total | 2308750 5 461750 Root MSE = 389.17

------

y | Coef. Std. Err. t P>|t| [95% Conf. Interval]

------+------

x | -178.4112 53.20631 -3.35 0.028 -326.1356 -30.68683

_cons | 1852.85 287.3469 6.45 0.003 1055.048 2650.653

------

.

end of do-file

An alternative is to place this file in the Stata do file editor and execute it!

Data is saved on-line in the Excel directory. These can be accessed by Stata or Excel from your PC.

Go of class web page then to FTP location then to EXEC directory or directly to

hhstokes.people.uic.edu/ftp/e323/

APPL Appliance Shipments Monthly 1983-1993

BEER Monthly Beer Production 1983-1993

BOATS Demand for Boats

CALDATA Monthly Sales of Electronic Calculators

CAMPERS Camp Development Decision

CAR Monthly Deliveries of Dorf Company

CASE10_1 Weekly Restaurant Sales

CASE10_4 Lydia Pinkham Annual Data 1907-1960

CASE2_2 Mr. Tux Rental Data

CASE4_1 Monthly Sales Data 1983-1995

CASE4_3 Consumer Credit Counseling Clients

CASE5_1 Solar Alternative Company Sales 93-94

CASE6_1 Tiger Transport Company - Weight & MPG

CASE6_2 Butcher Products Production Data

CASE6_3 Ace Personnel Company

CASE6_5 Credit clients

CASE7_1 Bond Market Dataset

CASE7_3 Mr. Tux with Dummy Variables

CASE7_4 Consumer Credit Counseling Extended Data

CASE8_1 Small Engine Doctor Data

CASE8_2 Case Study 8_2 Tux Data

CASE8_4 AAA Emergency Road Call Data 1988 - 1993

CASE9_5 Full AAA Emergency Data Jun 87 - Jul 93

CENEX Cenex Chemical Process

COMPANY Data Not Found

DAY90 Quarterly 90-day Treasury Bills

DISINC Disposable Income 1955 - 1985

EDPRICE Price of Higher Education 70-93

EGGS Production of Eggs 1961-1992

EMPLOYEE Employee Study

EX10_3 Daily Transportation Index Close

EX10_4 Readings from Atron Process

EX10_5 Errors of Atronm Quality Control

EX10_6 Errors for Ed Jones Quality Control

EX10_7 Closing Stocks of ISC

EX10_8 Keytron Sales

EX4_1 VCR's Sold

EX4_3 40 Random Numbers

EX4_4 Sears Sales

EX4_5 Outboard Marine 1984-1996

EX5_1 Acme Tool Company

EX5_4 Weekly Movie Video Rentals

EX6_1 Milk Sales

EX6_11 Hardware Advertising and Sales

EX7_1 Milk vs Price vs Advertising

EX7_12 Washington Power Usage

EX7_5 Job Performance

EX7_7 Food Expenditure

EX7_8 Zurenko Pharmaceutical Company

EX8_10 Quarterly Sales Outboard Marine

EX8_2 New Passenger Cars in the United States 60-92

EX8_8 Monthly Registration of Cars 1986-1992

EX9_1 Reynolds Metals 1976-1996

EX9_3 Novak Corp Sales 1980-1996

EX9_4 Yearly Sears Sales 1976-1966

FARMS Number of US Farms 1975-1993

FORREST Forest Products Car Loadings

FURNACE Shipments of Furnaces 1982-1990

GNP GNP 1950 - 1991

HANKEINFO Lists of Hanke Datasets

HOMES Demand for Motor Homes

HOUSEHOLD Household vs populations

IMPORTS National Imports for the years 1967 to 1986

INVEST Non residential Investment 1950-1989

KINSTON Monthly Sales of Kinston

MARRIAGE Number of Marriages 1965-1989

MEDIAN Population Dataset

MOODY Electric Utility Stocks Annual Ave

MOTEL Monthly Occupancy For Model 9 1987-1996

PAPER Monthly Demand for Paper Products

PE Quarterly Industrial P/E Ratio

PERFUME Monthly Demand for Perfume

PR10_10 80 obs of data

PR10_11 96 obs

PR10_12 IBM Stock Quotes

PR10_13 Daily DEF Corporation stock

PR10_14 Weekly Auto Accidents 1984-1985

PR10_15 Corn Price in Spokane Washington

PR10_7 Chips Bakery

PR10_8 126 obs of test data

PR10_9 80 Obs of test data

PR2_1 Customer Transactions

PR2_10 Books Sold vs Shelf Space

PR2_13 Random Stock Vs Temp Data

PR2_2 Housing Prices

PR2_7 Family Sizes

PR2_9 Maintenance of Buses

PR4_13 Marriages in US 85 - 92

PR4_17 Quarterly Loans Dominion Bank

PR4_20 Earning Per Share Price Company

PR5_11 Demand for Hughes Supply

PR5_12 Asset Value General American Investors

PR5_13 Revenues from Southdown Inc

PR5_14 Triton Sales per share

PR5_15 Revenues for the Consolidated Edison Company

PR5_6 Apex Mutual Fund Price

PR5_9 Davenport Bond Yield

PR6_11 Building Permits vs Interest Rate

PR6_12 Print Cost Data

PR6_13 Defective parts vs batch size

PR6_3 Sales vs Advertising

PR6_4 Checkout time vs Value of Purchase

PR6_5 Maintenance cost vs age

PR6_6 Books Sold vs Shelf Space

PR6_7 Orders vs Catalogues

PR6_8 Yearly Investment vs Interest Rate

PR6_9 Forecasting a Competitor bid

PR7_10 Sales = f(# outlets, # cars)

PR7_11 # Registered autos = f( )

PR7_13 What Makes a winning baseball team

PR7_15 Presto Sales

PR7_8 Checkout time vs Purchase & # items

PR8_11 Capital Spending 1977 - 1993

PR8_13 Spending on TV Ads

PR8_19 Goodyear Tires Sales 1985-1996

PR8_20 Retail Sales Data

PR9_10 Gas Consumption in the US

PR9_11 Resort Study

PR9_12 Revenue Data

PR9_13 Shareholder Data

PR9_14 passengers who flew on Thompson Airline planes.

PR9_15 Thomas Furniture Company sales

PR9_16 Dicksen vs Industry Sales

PR9_17 Savings in period 1935 - 1954

PRES New Prescriptions 1990-1996

PRIME1 Quarterly Prime Rate 1985-1991

PRIME2 Monthly average prime 1945-1995

RAILROAD Railroad Labor Annual Average Cents Per Hour

REFILL Monthly refill data 1983-1990

RIDERSHIP Daily Bus Ridership

SALARY Age vs Salary Data

SEARINC Sears Sales 1955 - 1985

STATIONS Number of TV stations changing hands in 1991

STOCK S & P Monthly 1945-1995