STATISTICS BRUSH UP COURSE for Master Program in

MACROECONOMICS POLICY AND FINANCIAL MARKETS

2013-2014 Academic Year



To be prepared for this course, one needs a good understanding of undergraduate level mathematical
statistics and linear algebra. The main topics one should understand well before taking the econometrics
course are listed below. They contain the statistical concepts studied in a standard undergraduate degree
in economics.

Linear Algebra

Vectors
Vector, vector space and vector subspace Euclidean space Column and row vector vector sum
linear combinations of vectors Spanned subspace Inner(dot, scalar) product norm length of a
vector distance between vectors orthogonal vectors.
Matrices
Definition of a matrix Elements of a matrix: rows, columns, main diagonal Matrix dimension
Square matrix Identity matrix Symmetric matrix Diagonal matrix Block and block diagonal matrix.
Matrix operations Transpose Determinant Inverse trace rank Matrix addition and subtraction
Scalar multiplication Matrix multiplication Properties of these operations.
Linear transformations and quadratic forms Differentiation of linear and quadratic forms.
Special matrices Singular Full column(row) rank matrix Positive/Negative definite matrix
Properties for these matrices.
Sistems of equations and matrices
Expressing a system of equations using matrices and vectors Solution of a system of equations
expressed in matrix form.






Mathematical Statistics

Random variables
Notion of random variable Discrete and continuous random variables
Distribution function Probability mass function and probability density function Properties of
probability functions.
Expectations and Moments Raw and centered moments Expectation of a random variable
Properties of expectations Variance of a random variable Properties of the variance How to
compute moments for discrete and continuous random variables Moment related features of a
probability distribution: central tendency, dispersion, skewness, kurtosis.
Special distributions for discrete random variables: Bernoulli, Binomial, Uniform Special distributions
for continuous random variables: Uniform, Normal, Standard Normal Gamma, exponential, Chi-
square, Student's t, F-distribution.
Distribution of linear and nonlinear transformations of random variables.
Random vectors
Vector of random variables Joint distribution of a random vector Moments of the joint distribution
Expectation of a random vector Covariance matrix of a random vector Expectation and covariance
matrix of a linear transformation of a random vector.
Marginal distribution Conditional distribution Conditional moments Conditional expectation
Conditional variance Properties of conditional expectations Bayes' theorem.
Independence between random variables Independence based on raw moments Independence
based on centered moments Covariance between two random variables Correlation and
dependence.
Special case: multivariate normal Properties of linear transformations of multivariate normals
Construction of a Chi-square random variable from a multivariate normal.
Statistical Inference

Population Samples Sampling Estimators and Estimates Estimation by the method of moments
Maximum likelihood estimation Distribution of the sample mean Distribution of the sample variance
Properties of estimators: unbiasedness and efficiency Law of large numbers and central limit
theorem Asymptotic properties Consistency Asymptotic normality.
Hypothesis testing and confidence intervals Testing hypothesis about the mean of a normal
distribution with known variance Testing hypothesis about the mean of a normal distribution with
unknown variance Test statistic value The p-value Significance level Critical value Acceptance
and rejection region How to find critical values Power and size of a test Type-I and Type-II errors.




References
There are many suitable text books to review the topics listed above. Undergraduate econometrics
textbooks often include a summary of the most relevant parts of linear algebra and statistics. An example
is Wooldridge, Introductory Econometrics: A Modern Approach, 4th edition.
For a more detailed review of statistics:

- Larsen and Marx, An Introduction to Mathematical Statistics and its Application.
- Hogg and Craig, Introduction to Mathematical Statistics.
- Mittelhammer, Mathematical Statistics for Economics and Business.

There are also many online sources. For the linear algebra part you can check:
- http://tutorial.math.lamar.edu/Classes/LinAlg/LinAlg.aspx
- http://www.khanacademy.org/?video=introduction-to-matrices#linear-algebra.

For mathematical statistics part, you can check:
- http://www.aiaccess.net/e_gm.htm.