# Econometrics Case Study. The main objective of this project is to apply the econometrics methods that we have obtained through out the course to create a reliable and useful model for capturing the potential relationship between variables of interest.

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Done by:

Hiba Al Farsi

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Content

Executive summary

In this report we are going to examine the relationship between the variable to estimate a good econometrics model .An econometric model is only as good as the underlying desirable assumptions. If these assumption are not fulfilled the model is useless. Using Diagnostic tests would help us in testing wither the assumption is fulfilled or not. And these are: No Misspecification, No Autocorrelation, Homoscedasticity and normality. If any of the assumption is not fulfilled then a potential remedy should be found before the model can be used .Then in each testing we will demonstrate if we create a reliable and useful model for capturing the potential relationship between variables of interest .

Introduction

Econometrics is fundamental for economic measurements. However, it is important extends far beyond the discipline of economics. Econometrics is a set of research tools also employed in the business discipline of accounting, finance, marketing and managements.

In Addition, econometrics plays a special role in the training of economist .As a Finance student we are assigned by Dr. Abdulnasser Hatemi Jarabad to learn on how to be an economist in applying econometrics model that we have acquired from the course.

In this report we collect data from Dubai financial market in 2008 by selecting two variables to use; market price index  and stock price of one of the listed banks in the market .First dependent variable (y) is market price index  and the second independent variable (x) is the stock price of Commercial Bank of Dubai (CBD) .Using Regression analysis is to examine the potential relation of a dependent variable (y) to specified independent variable (x). To simplify things we define dependent variable as (y) and independent variable as (x) because this variable explains the variation in (y). These two have cause and effect relationship. This will lead that stock price of Commercial Bank of Dubai will cause market price index   to increase or decrees (any changes in (x) will lead changes to (y) ).

Moreover ,The main objective of this project is to apply the econometrics methods that we have obtained  through out  the course to create a reliable and useful model for capturing the potential relationship between variables of interest.

First Section :Objective and Goals

Econometrics is ultimately a research tool. So our mission as a student to plan , read  and evaluate .Starting with searching for the Time-series  data in Financial market where we select two variable. Along with using data we will use tools from statistic specially with econometric software  which is :

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• E-views:

EViews (Econometric Views) is a  for , used mainly for time-series oriented . It is developed by Quantitative Micro Software (QMS), now a part of . Version 1.0 was released in March 1994, and replaced MicroTSP. The current version of EViews is 7.2, released in Nov 2011.

It can be used for general statistical analysis and econometric analyses, such as cross-section and panel data analysis and  estimation and forecasting.

Also, EViews combines  and relational database technology with the traditional tasks found in statistical software, and uses a Windows . This is combined with a  which displays limited .

EViews relies heavily on a proprietary and undocumented file format for data storage. However, for input and output it supports numerous formats, including , , /, /, , , and . EViews can access  databases. EViews file formats can be partially opened by .

Using E-views will complete our mission by predicting the outcome and that’s  the practical part of the process .But it will be incomplete if we didn’t set our Objective and Goals :

Estimated Result and Analysis

Description of Data:

After selecting our data from Dubai financial market the .We are going to have a look on the relationship between the variables that we have been chosen, which are the stock price index for the market and the stock price index of Commercial Bank of Dubai. And here is the data:

This table shows the variable  of year 2008 that we will examine starting with (y)  which is dependent variable and (x) is independent variable . As we mentioned before The stock price index of the market is our dependent variable (y) and the stock price index of Commercial Bank of Dubai is our independent variable (x). Also we explained that if any change happened in  stock price index of Commercial Bank of Dubai  will lead to ...