Financial Modelling Techniques
Individual Coursework for 2025 - 2026
Write a report entitled ‘An explanation of short-run changes in U.K. inflation, 2000 – 2025 ’. Your report should be around 1,500 words and must be uploaded on canvas on Thursday 11th December 2025. Your project will require you to use cointegration techniques and to build a short-run error correction model. You are required to select three variables of your own choice, which you feel are useful in explaining recent movements in U.K. inflation. You may use STATA or EVIEWS and/or other statistical software of your own choice. You are required to submit your software output as an appendix, and you should also submit your data and econometric work files.
Possible Data Sources:
You may find the following sources of data useful
DataStream
Bank of England Statistical Interactive Database
World Bank Open Data https://data.worldbank.org/
DataBank: World Development Indicators
FAME
CRSP
COMPUSTAT
Bloomberg
Guidelines for writing up projects:
Your project should cover the following themes.
1. Introduction
This section identifies the topic, explaining why it is of interest, what the expected conclusions are, what your paper's findings are, and how the report is structured.
2. Brief Literature Review
You may use DataStream, or other databases to identify previous models and work. You should describe the economic theory underlying the topic outlined above. In particular, you should define concepts that you are likely to be testing in the statistical analysis.
This is where you should be laying out your model, and you are expected to describe the model you plan to estimate and whose earlier work you have based it on.
3. Data and Methodology
Explain the sources of the data (display a table of your data along with precise sources, and detailed definitions of variables in an Appendix). Explain why you have chosen to use specific definitions in your analysis and describe any problems you have encountered in collecting the data (e.g., limited availability of data, changes in definitions of published variables, etc.). Are there likely to be any problems specific to your project?
A concise description is needed of the econometric techniques to be employed. Explain why these techniques are necessary and/or appropriate for the data in hand.
4. Results and Interpretation
This is a particularly important section of the project. Clearly present the results of your analysis. Comment on the goodness of fit of the model and the economic and statistical properties of the estimates. If you have tried different specifications of the model, make comparisons of the different interpretations of these models. Check for any technical problems with your preferred regression model. Model mis- specification tests are recommended. Clearly show the tests you have used and the conclusions you have drawn, and also identify which model is the best econometric model and why it is so. If problems still exist in your best model, comment on the potential cures.
There is a need for carefully interpreting the economic meaning of the best model based on the model specification tests above.
5. Conclusions
Please ensure your conclusions are broader than just a simple summary of your results.
6. Limitations and Policy Recommendations
You should report any limitations of your study and suggest recommendations to economic policymakers.
7. Bibliography
Use standard economics referencing techniques here and with references in the text.
Note:
A useful guide to writing an empirical research report is to be found in Saunders M.K., Lewis P. and Thornhill A., “Research Methods for Business Students” Ninth Edition. Pearson Press, ISBN 13- 978-1292402727 Chapter 14