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Concept# Econometric model

Summary

Econometric models are statistical models used in econometrics. An econometric model specifies the statistical relationship that is believed to hold between the various economic quantities pertaining to a particular economic phenomenon. An econometric model can be derived from a deterministic economic model by allowing for uncertainty, or from an economic model which itself is stochastic. However, it is also possible to use econometric models that are not tied to any specific economic theory.
A simple example of an econometric model is one that assumes that monthly spending by consumers is linearly dependent on consumers' income in the previous month. Then the model will consist of the equation
:C_t = a + bY_{t-1} + e_t,
where Ct is consumer spending in month t, Yt-1 is income during the previous month, and et is an error term measuring the extent to which the model cannot fully explain consumption. Then one objective of the econometrician is to obtain estimates of the

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MGT-581: Introduction to econometrics

The course provides an introduction to econometrics. The objective is to learn how to make valid (i.e., causal) inference from economic data. It explains the main estimators and present methods to deal with endogeneity issues.

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The course covers basic econometric models and methods that are routinely applied to obtain inference results in economic and financial applications.

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This course aims to give an introduction to the application of machine learning to finance. These techniques gained popularity due to the limitations of traditional financial econometrics methods tackling big data. We will review and compare traditional methods and machine learning algorithms.

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Transmission System Operators (TSOs) deploy frequency control reserves and regulating power to maintain the load-generation balance in real-time operation of power systems. In the Nordic countries, the TSOs buy regulating power from the Nord Pool regulating power market. In this paper, we developed a tool to quantify the price of regulating power as a function of both economic parameters such as spot (day-ahead) market price, and technical factors representing the current state of the system. First, the Nord Pool is considered as a single bidding area and an aggregated regulating power price is obtained, proving the validity of a simple non-linear algebraic model, when there is no influence of interconnections with neighboring areas. Then, we developed a case study for the West Denmark area, to demonstrate that for complex systems, where there is possibility of trade with other areas and there is high penetration of intermittent generation (e.g., wind power), this simple formulation is no longer valid. Finally, to solve this inconsistency, an improved model is here proposed by considering the effect of interconnections through two scenarios: one for unconstrained trade through the interconnections with neighbouring areas, and the second one where at least one of the interconnecting lines is congested. In addition, the wind penetration level is included as a parameter the non-linear algebraic model.

Suhas Diggavi, Vinod Malathidevi Prabhakaran, Shirin Saeedi Bidokhti

In this paper, we take a deterministic approach to the problem of broadcasting nested message sets. We mainly consider the scenario where a common message and a private message are to be encoded into a signal and transmitted over a broadcast channel towards a set of users. A group of the users, called public receivers, demand only the common message and the rest, called private receivers, demand both messages. A Linear deterministic model for broadcast channels assumes that every user receives a linear transformation of the sent signal. This model is mainly motivated by the MIMO Gaussian broadcast problem in the high SNR regime. We start our study with a simple, yet rich, class of such broadcast channels. We address the main challenges in designing optimal encoding schemes and seek new techniques. In particular, we give an exact characterization of the ultimate rates of communication (together with a class of linear codes that achieves them) over channels with three public and any number of private receivers. We show sub-optimality of these schemes for channels with more than three public receivers and propose a block Markov scheme which allows communication at higher rates. Using this technique, we characterize a set of achievable rates of communication. The intuitions and techniques that we develop over this class of channels guide us towards designing optimal codes for (general) linear deterministic channels. We fully characterize the set of all admissible rates of communication for linear deterministic channels with two public and any number of private receivers. We extend this result to also allow communication of three nested message sets. The study of deterministic models is aimed to be instructive for understanding more general channels. In this regard, we consider the problem of broadcasting two nested message sets over general broadcast channels with two public and one private receiver. For such general broadcast channels, the ultimate rates of communications (and consequently optimal communication schemes) are still unknown. We adapt the block Markov encoding scheme, which we developed within the framework of linear deterministic channels, to general broadcast channels and characterize a set of achievable rates. We discuss potential future directions that seem promising.

2012Related lectures (6)

Mokhtar Bozorg, Mario Paolone, Fabrizio Sossan

Transmission System Operators (TSOs) deploy frequency control reserves and regulating power to maintain the load-generation balance in real-time operation of power systems. In the Nordic countries, the TSOs buy regulating power from the Nord Pool regulating power market. In this paper, we developed a tool to quantify the price of regulating power as a function of both economic parameters such as spot (day-ahead) market price, and technical factors representing the current state of the system. First, the Nord Pool is considered as a single bidding area and an aggregated regulating power price is obtained, proving the validity of a simple non-linear algebraic model, when there is no influence of interconnections with neighboring areas. Then, we developed a case study for the West Denmark area, to demonstrate that for complex systems, where there is possibility of trade with other areas and there is high penetration of intermittent generation (e.g., wind power), this simple formulation is no longer valid. Finally, to solve this inconsistency, an improved model is here proposed by considering the effect of interconnections through two scenarios: one for unconstrained trade through the interconnections with neighbouring areas, and the second one where at least one of the interconnecting lines is congested. In addition, the wind penetration level is included as a parameter the non-linear algebraic model.