Collection of Formulae and Statistical Tables for

the B2-Econometrics and B3-Time Series

Analysis courses and exams
Lars Forsberg
Uppsala University
Spring 2015

Abstract
This collection of formulae is to be used during the courses and at the
written examinations for Econometrics and Time Series Analysis.
Students should, and must bring this collection of Formulae to the
exam. There will be NO HANDING out of this collection at the exam
location.
Also note that AT THE EXAM, THERE MUST BE NO NOTES OF
ANY KIND in this collection.
If students have made notes in this collection during the course, they
must print and bring a new copy without any notes to the exam. The
sta¤ at the exam location are instructed to randomly check the collection
for notes. If they …nd any notes of any kind in this collection, this will
be reported to the responsible teacher, and the student will be subject to
an investigation whether he or she should be reported to the disciplinary
committé for cheating.
Also note, that this means that students CANNOT MAKE ANY
NOTES IN THIS COLLECTION DURING THE EXAM. Of course, notes
made during the exam will be observationaly indistinguishable from notes
made beforehand. To remedy this situation, any notes will be be assumed
to be written before the exam, and thus will be reported.
Moreover, students are NOT allowed to pass this collection between
them at the exam.

1
Contents
1 Test -templete 3

2 Basic Statistics 4
2.1 Expectation, Variance and Co-variance . . . . . . . . . . . . . . . 4

3 Regression 5
3.1 Single linear regression . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Z and t-tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Con…dence intervals . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Multiple Regression . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 F-tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Normality test . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

4 Time Series 8
4.1 Back shift operator . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Di¤erence operator . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Seasonal Di¤erence operator . . . . . . . . . . . . . . . . . . . . . 9
4.4 Geometric series . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Ljung-Box Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Test of an individual correlation . . . . . . . . . . . . . . . . . . 10
4.7 ADF unit root test . . . . . . . . . . . . . . . . . . . . . . . . . . 11

5 Math 12
5.1 Quadratic identities . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Power function . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Exponential function . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 The logarithmic function . . . . . . . . . . . . . . . . . . . . . . . 13

6 Appendix: Statistical tables1 14

6.1 The Normal Distriubtion . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 The Student’s t-distribution . . . . . . . . . . . . . . . . . . . . . 16
6.3 The Chi-Square Distribution . . . . . . . . . . . . . . . . . . . . 17
6.4 The F-Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1 These tables are courtesy of Dr. Thommy Perlinger, whose contribution is greatfully

acknowledged.

2
1 Test -templete
Whenever you perform a formal test on a written exam in Econometrics or Time
Series Analysis, you must follow the outline in the template below for full score
on that task.

1. The null and the alternative hypotheses

State the null and the alternative in terms of relevant parameters.
2. Signi…cance level
3. Estimator(s)/statistic(s) used
State the estimator(s)/statistic(s), not nessecarily using the exact formula
but it should be clear what kind of estimator(s)/statistic(s) that are being
used.
4. Assumptions
State the assumption(s) nessecary for the test to be valid.
5. Test statistic
Write down the test statistic as a function of the estimator(s) and, if
applicable, parameter value(s) under the null. State the distribution it
follows (with its parameter or degrees of freedom values) under the null
and your assumptions.
Note: it is the statistic that follows a known distribution under the null
(and the assumptions) that you should write down. This statistic might
be a function of other quantities as well as estimators of the parameters
in the null hypothesis.
6. Figure under the null and decision rule
If it is well known, sketch the distribution of the test statistic under the null
hypothesis (and your assumptions). Clearly mark out the critical value(s)
and the correponding rejection region(s) and mark the probability mass in
(each of) the (respective) rejection/ region(s). Clearly state the decision
rule as: The null is rejected if...
7. Calculations and decision
Collect all the information nessecary for the calculations, such as sample
size, degrees of freedom etc. All the statistics that are being used need
to be reported here, it is not su¢ cient to refer to the estimation output.
Perform the nessecary calculations or report here the nessecary numbers
from the estimation output. For all calculations, …rst state the "general"
formula and then …ll in the actual numbers. It must be perfectly clear
what all numbers represent and where they come from.
8. Conclusion.
Given the result and decision, write down the conclusion of the test.

3
2 Basic Statistics
2.1 Expectation, Variance and Co-variance
Some basics, for any random variables X, Y; Z and W and constants a, b; c
and d we have
E (aX) = aE (X) (1)
h i
2
V ar (X) = E (X E (X)) (2)

V ar (aX + b) = a2 V ar (X) (3)

V (aX + bY ) = a2 V (X) + b2 V (Y ) + 2abCov (X; Y ) (4)

= Cov [(aX + bY ) ; (cZ + dY )] (5)

= acCov (X; Z) + adCov (X; Y ) + bcCov (Y; Z) + bdCov (Y; Y ) (6)

4
3 Regression
3.1 Single linear regression
The single linear regression is given by

Yi = 1 + 2 Xi + ui (7)

The OLS-estimator of the intercept is given by

c=Y cX
1 2

and the OLS-estimator of the slope is given by

n
c= i=1 Xi X Yi Y
2 2
n Xi X
i=1

The OLS-estimator of the error term variance is

n
c2 = b2i
i=1 u
(8)
n k
The variance of the estimated slope coe¢ cient is given by
2
2
c = 2
2 n Xi X
i=1

where n is the number of observations and k is the number of coe¢ cients in

the regression equation.
The coe¢ cient of determination is given by
n
b2i
i=1 u
R2 = 1 2 (9)
n Yi Y
i=1

3.2 Z and t-tests

To test hypotheses about the regression coe¢ cients we can use, assuming that
the error term variance is known,

b H0
j j
zObs = N (0; 1) (10)
b
j

and when we have to estimate the error term variance, we need to use

b H0
j j
tObs = tn k:
bb
j

5
3.3 Con…dence intervals
Con…dence intervals: For a normally distributed N (0; 1) variable such as

b
j j
zObs = N (0; 1) (11)
b
j

consider the following probabilistic statement.

Pr z =2 zObs z =2 =1 : (12)

Con…dence intervals: For a Student’s t distributed variable such as

b
j j
tObs = tn k (13)
bb
j

consider the following probabilistic statement.

Pr tn k; =2 tObs tn k; =2 =1 : (14)

3.4 Multiple Regression

The general multiple regression model

Yi = 1 + 2 X2;i + ::: + 3 Xk;i + ui

has k coe¢ cients, k 1 regressors.

The variance !
2
2 1
b =P 2 (15)
j
Xj Xj 1 Rj2

Rj2 would be the R2 from the regression of Xj upon an intercept and all the
other regressors in the original model.

6
3.5 F-tests
To test linear restrictions - note that we in this situation have two models, one
unrestricted, (the original model) and one model where the restrictions of the
null are imposed/implemented (the restricted model). Any linear restriction
can be tested using
2 2
RU R RR =m
Fobs = 2 Fm;n k; (16)
(1 RU R ) = (n k)

where
2
RU R is the coe¢ cient of determination for the UnRestricted model
2
RR is the coe¢ cient of determination for the Restricted model
m is the number of (linear) restrictions (in the null hypothesis)
n is the number of observations
k is the number of regression coe¢ cients (parameters) in the regression
line of the UnRestricted model (including the intercept, if there is one).

3.6 Normality test

The Jarque-Bera test for normality uses the following test statistic
" #
2
S2 (K 3) 2
JB = n + 2 (17)
6 24

(i.e. follows a chi-square distribution with two degrees of freedom) where

n is the sample size

S is the sample skewness
K is the sample kurtosis

7
4 Time Series
4.1 Back shift operator
Let fYt g be a stochasic process. The back-shift operator B is de…ned as

B 0 Yt = Yt 0

B 1 Yt = Yt 1

B 2 Yt = Yt 2

and
B j Yt = Yt j:

Note that for a constant c we have

B j c = c:

for all j:

4.2 Di¤erence operator

Let fYt g be a stochasic process. The di¤ erence-operator r is de…ned as

r1 Yt = Yt Yt 1

also
j
rj = 1 B1
Note that for a constant c we have
1
rc = 1 B1 c
rc = c Bc
rc = c c
rc = 0:

8
4.3 Seasonal Di¤erence operator
Let fYt g be a stochasic process. The seasonal di¤ erence-operator rs is de…ned
as
r1s Yt = Yt Yt s
We note that
1
r1s = (1 Bs)
2
r2s = (1 Bs)
and
j
rjs = (1 Bs)
Note that for a constant c we have
1
rc = (1 B s ) c
rc = c Bsc
rc = c c
rc = 0

4.4 Geometric series

For time series we might …nd the following useful

1 j 1
j=0 r = 1 r for jrj < 1

1 j 1
j=0 (B ) = 1 B for j j < 1

1 j 1
j=0 (B ) = 1 B for j j < 1

where B denotes the back-shift operator and and are a constants (parame-
ters).

9
4.5 Ljung-Box Test
The Ljung-Box test tests whether several autocorrelations (K of them) are zero
simultaneously, i.e.

H0 : 1 = ::: = K = 0
H1 : at least one j 6= 0 for j = 1; :::; K

The test statistic is given by

K
b2j
QLB = T (T + 2) j=1
T j

where T is the sample size and bj is the j:th autocorrelation, which under the
null and for large samples, follows a
2
(K p q P Q)

where p; q; P and Q are the order of the AR, MA, SAR, SMA parts respectively,
(assuming that we do the test on residuals from a model). That is, we subtract
from K the number of parameters estimated in the model at hand.
If the test is applied on raw data, of course, we have not estimated any
parameters, i.e. p = q = P = Q = 0:

4.6 Test of an individual correlation

To test an individual autocorrelation,
H0
H0 : k = k
H0
H1 : k 6= k

we use the following test statistic

H0
bk k
zobs =
bk

which under the null and for large samples follows a N (0; 1) distribution and
where r
1
bk =
T
where T is the sample size.

10
4.7 ADF unit root test
To test for a unit root in Yt we run the (auxiliary) regression

rYt = aYt 1 +[ 1 rYt 1 + 2 rYt 2 + :::: + k rYt k ] + et

and do a t-test of
H0 : a 0
H1 : a < 0
Where the null respresents that we have a unit root in Yt ; that is, that Yt I (1) :
The test statistic is the ’t-ratio’(not really a t-ratio since it follows a non-
standard distribution under the null)

b
a 0
ADFobs =
bba
NOTE: under the null of a unit root, the ADFobs does NOT follow any stan-
dard distribution. Its distribution is tabulated and is included in any software
that has this test, e.g. Eviews. So, when performing this test, following the
test-template, it is not nessecary to draw a …gure of the distribution under the
null and the assumptions (since that is unknown). However, it should be noted
that the reason for no …gure is the fact that the distribution is non-standard!
The decision to reject or not - is based on the p-value of the test, compared to
the chosen signi…cance level of the test.

11
5 Math
5.1 Quadratic identities
For a; b and c being real numbers, then
2
(a + b) = a2 + b2 + 2ab; (18)
2 2 2
(a b) = a + b 2ab; (19)
2 2
(a + b) (a b) = a b ; (20)
and
2
(a + b + c) = a2 + b2 + c2 + 2ab + 2ac + 2bc: (21)

5.2 Power function

The general power function in given by
f (x) = Axr ; (22)
where A and r are constants. Some rules for manipulating power functions are
xr xs = xr+s (23)

r
(xy) = xr y r (24)

r
x xr
= (25)
y yr
s
(xr ) = xrs (26)

xr
= xr s
(27)
xs

1 1
x = (28)
x

n 1
x = (29)
xn
p
x = x1=2 (30)

1 1=2
p = x : (31)
x

5.3 Exponential function

For the exponential function
f (x) = ax (32)

12
note that a is a constant and that x is the variable. We have that

ax ay = ax+y (33)

y
(ax ) = axy (34)

x
(ab) = ax bx (35)

ax
= ax y
(36)
ay
a x ax
= (37)
b bx

5.4 The logarithmic function

De…nition of ln a is given by
eln a = a (38)
a > 0: Now, it follows that

ln 1 = 0; (39)
ln e = 1: (40)

Some rules for logarithmic function ln

ln (xy) = ln x + ln y; (41)
x
ln = ln x ln y; (42)
y
ln xp = p ln x; (43)
ln ex = x: (44)

13
6 Appendix: Statistical tables2
6.1 The Normal Distriubtion

2 These tables are courtesy of Dr. Thommy Perlinger, whose contribution is greatfully

acknowledged.

14
15
6.2 The Student’s t-distribution

16
6.3 The Chi-Square Distribution

17
6.4 The F-Distribution

18
19
20
21