UCL Department of Economics MSc Maths and Statistics Refresher Course

Jidong Zhou Autumn 2009

Maths and Statistics Refresher Course

Lecturer: Dr. Jidong Zhou

Contact: jidong.zhou@ucl.ac.uk

This course revises the analytical tools most frequently used in economics and econo-
metrics, aiming at ensuring that all students handle the basic analytical concepts used in
the other MSc courses.
The first half of the course will revise mathematical concepts and methods with an
emphasis on optimization. The following book discusses most of the material we will cover
in an accessible way:

• (SB) Simon, C.P. and L. Blume (1994): Mathematics for Economists, New York:
Norton.

Other helpful books include:

• (MWG) Mas-Colell, A., M.D. Whinston, and J.R. Green (1995): Microeconomic
Theory, Oxford University Press. (Mathematical Appendix)

• (PR) Pemberton, M. and N. Rau (2006): Mathematics for Economists: An Intro-

ductory Textbook, Manchester University Press.

• Wickens, M. (2008): Macroeconomic Theory: A Dynamic General Equilibrium Ap-

proach, Princeton University Press. (Mathematical Appendix)

The second half of the course will revise the concepts of probability and statistics
frequently used in econometrics and economic problems under uncertainty. The main
textbooks we will follow are:

• (DS) DeGroot, M.H. and M.J. Schervish (2002): Probability and Statistics, 3rd ed.,
Addison-Wesley. (Chapters 1—8)

• Greene, W.H. (2008): Econometric Analysis, 6th ed., Prentice-Hall. (Appendices

A—D)

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UCL Department of Economics MSc Maths and Statistics Refresher Course
Jidong Zhou Autumn 2009

Syllabus:
(1) Due to the time constraint, we will be unable to discuss the first chapter “Mathe-
matical preliminaries” in the lectures. You are therefore required to study it by yourself
before you come to UCL. Please follow the references and exercises I provide below.
(2) You are strongly recommended to review the very basic concepts (which I have
starred) before you attend the course. We will only discuss them very briefly in the
lectures, since you are supposed to be familiar with them through your undergraduate
studies. You can find relevant materials in the references.
(3) You are required to go through the exercises I suggest below before you attend
the course.

0. Mathematical preliminaries
Sets, sequences, limits, open sets, closed sets, compact sets, complex numbers, basic
logics.
References: SB: Chapters 12, A1, A3.1-3
Exercises: SB: 12.1, 12.6, 12.15, 12.18, 12.20, 12.21, 12.25, 12.27, 12.31, A1.2-3, A1.5,
A3.2, A3.6.

1. One-variable calculus
Functions∗ , derivatives∗ , differentiation rules∗ , mean value theorems, L’Hospital’s rule,
Taylor expansion, monotonic functions∗ , concave and convex functions.
References: SB: Chapters 2—4, 30; Exercises: SB: 2.11
Indefinite integrals∗ , definite integrals, integration rules, the fundamental theorems of
calculus.
References: PR: Chapters 19—201

2. Matrix Algebra
Matrices∗ , ranks∗ , determinants∗ , operations with matrices∗ , systems of linear equa-
tions, eigenvalues and eigenvectors, quadratic forms, Cholesky decomposition.
References: SB: Chapters 6—9, 16.1-2, 23.3-5; Greene: Appendix A
Exercises: SB: 7.20, 8.1

3. Calculus of several variables

Derivatives and partial derivatives∗ , the implicit function theorem, Taylor expansion
in Rn , double integration.
References: SB: Chapters 13—15
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You can also find relevant materials about integration in any undergraduate textbooks on calculus.

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UCL Department of Economics MSc Maths and Statistics Refresher Course
Jidong Zhou Autumn 2009

4. Optimization
Concavity and quasi-concavity, unconstrained optimization∗ , optimization with equal-
ity constraints, optimization with inequality constraints, the envelope theorem, compara-
tive static analysis.
References: SB: Chapters 17—19, 21; MWG: M.C, M.J-L
Exercises: SB: 17.1

5. Introductory dynamic programming

Finite-horizon dynamic programming, infinite-horizon dynamic programming.
References: Wickens: Chapter 15; MWG: M.N2
Introductory difference equations.
References: PR: Chapters 21.4, 26.1

6. Probability theory
Probability∗ , counting methods∗ , conditional probability, independence, Bayes’ theo-
rem.
References: DS: Chapters 1—2
Exercises: DS: 1.6-1, 1.6-3, 1.7-5

7. Random variables and distributions

Univariate random variables∗ , distribution functions∗ , expectation∗ , variance∗ , mo-
ments, important univariate distributions; multivariate random variables, joint distribu-
tion, marginal distribution, conditional distribution, important multivariate random vari-
ables, covariance and correlation, law of iterated expectations.
References: DS: Chapters 3—5; Greene: Appendix B
Exercises: DS: 3.1-3, 3.2-5, 3.3-5, 4.1-1, 4.1-9, 4.3-3

8. Large-sample distribution theory

Random samples∗ , descriptive statistics∗ , the Markov and Chebyshev inequalities; large
samples, convergence, the law of large numbers, the central limit theorem, asymptotic
distribution.
References: Greene: Appendix D; DS: Chapters 4.8, 5.7

9. Estimation and testing

Estimation∗ , method of moments∗ , maximum likelihood estimator, confidence intervals∗ ,
hypothesis testing.
References: DS: Chapters 6.1-2, 6.5, 7.5, 8.1-7; Greene: Appendix C
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A full and rigorous treatment of dynamic programming is beyond the scope of this refresher course.
We will only go through some examples.