Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships.
More precisely, it is "the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference".
Econometrics allows economists "to sift through mountains of data to extract simple relationships".
analysis of cross section and panel data and by its focus on individual consumers, firms, and micro-level decision makers.
Practitioners rely heavily on the theoretical tools of microeconomics including utility maximization, profit maximization, and market equilibrium.
Do smaller class sizes bring real benefits in student performance? Does the presence of health insurance induce individuals to make heavier use of the health care system?
It is involved in the analysis of time-series data, usually of broad aggregates such as price levels, the money supply, exchange rates, output, investment, economic growth and so on.
Macroeconomic projections (forecasts) as well as assessment of effects of economic policies are the most important outcomes.
Some modern approaches utilise microfundations, however the final model aggregates decisions of individuals.
It is concerned with long time-series data and occasionally vast panel data sets, but with a sharply focused orientation toward models of volatility of the financial returns.
The issue of particular interest is the measurement of risk and its determinants.
