178.280 Research Methods in Financial Economics
Assignment 1
Due Date August 28, 12 noon.
Note carefully the due date and time.
General Description of Assignment
This lab is about creating an OLS model to explain the quantity of canned tuna sold at
one particular supermarket.
The reason it is set as a written exercise is to develop your report-writing skills. Koop
(p211-13) has some notes that will assist you.
Format
The assignment should be typed with a 12 point font. The lines should have 1½ lines
spacing. Overall the assignment must not exceed 1500 words. Tables of output from
SHAZAM do not count towards this limit.
Data
Weekly sales for a brand of tuna were collected over a calendar year. There are 52
observations in the file bertrand.txt
The variables are:
Q – the unit sales of brand #1 canned tuna
P1 – the price of brand #1 canned tuna
P2 – the price of brand #2 canned tuna
P3 – the price of brand #3 canned tuna
DISP – a dummy variable that takes the value 1 if there is a store display for brand #1
during the week but no newspaper ad; 0 otherwise
DISPAD – a dummy variable that takes the value of 1 if there is a store display and a
newspaper advertisement during the week; otherwise 0.
Structure of Assignment
The assignment should follow the structure below. Remember the word limit and try
to devote most of your write-up to the empirical parts of the project.
1. Introduction
- Outline the main issues your assignment will investigate.
2. Economic Theory
- Discuss the main elements of the Bertrand Model.
3. Data
- Outline the data you will use. Describe any new variables you have created.
4. The model to be estimated
- Explain what you expect to see in your results from your theory. Justify the
functional-form of your model.
5. Empirical results
- Present the results from your model in a simple table.
6. Conclusion
- Evaluate the model you generated. Note any surprising results and if necessary,
account for them.
Grades
You will be awarded a letter grade. Your assignment will be graded on two
properties. The first is the quality of your regression modelling. 75% of your grade is
weighted to this component. The second aspect is your writing quality. This
incorporates basic elements of spelling, English grammar and readability. 25% of
your grade will be based on this component.
Note- this assignment is a significant piece of work. It is expected that you will write
this report up independently of any other people in the course. The penalties for
plagiarism are severe in this department. You are advised to read the study guide on
avoiding plagiarism.