Will There Be Jobs For All of Us Will There Be Jobs For All of Us Financial Econometricians? Financial Econometricians?

Ben KalloBen Kallo James Katavolos James Katavolos Luke PanzarLuke Panzar Ryan CarlRyan Carl

Let’s look at Financial Jobs in Let’s look at Financial Jobs in the U.S. Economythe U.S. Economy

Data gathered from the St.Louis Federal Data gathered from the St.Louis Federal ReserveReserve

Also includes jobs in the real estate and Also includes jobs in the real estate and insurance fields insurance fields

Monthly Data from 1946 to 2003Monthly Data from 1946 to 2003

Objective of ModelObjective of Model

Using a time-series model, we Using a time-series model, we should be able to forecast the trend should be able to forecast the trend of jobs in the finance industry for of jobs in the finance industry for at least the next six months.at least the next six months.

Total Jobs in the Finance IndustryTotal Jobs in the Finance Industry

Correlogram of FINJOBSCorrelogram of FINJOBS

Points to an evolutionary series

Histogram of FINJOBSHistogram of FINJOBS

Dickey-Fuller Test for FINJOBSDickey-Fuller Test for FINJOBS

ADF stat confirms the presence of an evolutionary times series

Mission: StationarityMission: Stationarity

In order to make the series stationary (not In order to make the series stationary (not dependent on time), we will perform a dependent on time), we will perform a logarithmic transformation as well as logarithmic transformation as well as difference the series. difference the series.

The new data set will be called:The new data set will be called:

DLNFINJOBSDLNFINJOBS

DLNFINJOBSDLNFINJOBS

The economic interpretation of The economic interpretation of DLNFINJOBS is the month over DLNFINJOBS is the month over month percentage change in the month percentage change in the number of jobs in the finance number of jobs in the finance industry in the United States.industry in the United States.

Line Graph for DLNFINJOBSLine Graph for DLNFINJOBS

Looks Stationary

Correlogram of DLNFINJOBSCorrelogram of DLNFINJOBS

The structure in the ACF and the spike at lag 1 of the PACF suggest that we should use an ARONE model

Histogram of DLNFINJOBSHistogram of DLNFINJOBS

0

40

80

120

160

-0.015 -0.010 -0.005 0.000 0.005 0.010 0.015

Series: DLNFINJOBSSample 1946:03 2003:03Observations 685

Mean 0.002308Median 0.002320Maximum 0.014779Minimum -0.016935Std. Dev. 0.002188Skewness -0.477327Kurtosis 13.42719

Jarque-Bera 3129.241Probability 0.000000

Dickey-Fuller Test of DLNFINJOBSDickey-Fuller Test of DLNFINJOBS

Stationarity Confirmed

Model Output for DLNFINJOBSModel Output for DLNFINJOBS

Correlogram for ModelCorrelogram for Model

Next Model OutputNext Model Output

CorrelogramCorrelogram

This new model only This new model only seems to create more seems to create more structure, with spikes structure, with spikes at lags 4,5, 10,11,13at lags 4,5, 10,11,13

Correlogram of Squared ResidualsCorrelogram of Squared Residuals

To see whether a ARCH-GARCH model is appropriate

After running an ARCH-GARCH, the model did not improve

Now try: AR1,MA1,MA13Now try: AR1,MA1,MA13

Again, this new model Again, this new model seems to add structureseems to add structure

Final Conclusion:Final Conclusion:

Our best model is our Our best model is our original one:original one:

AR1,MA1AR1,MA1

Actual, Fitted, Resid for ModelActual, Fitted, Resid for Model

Total Jobs in the Finance IndustryTotal Jobs in the Finance Industry 2003:042003:04 0.001130 0.001130 2003:052003:05 0.000932 0.000932 2003:062003:06 0.000896 0.000896 2003:072003:07 0.000817 0.000817 2003:082003:08 0.000783 0.000783 2003:092003:09 0.000751 0.000751 2003:102003:10 0.000720 0.000720 2003:112003:11 0.000690 0.000690 2003:122003:12 0.000662 0.000662 2004:012004:01 0.000634 0.000634

Percentage Change in FinJobs

0

0.0002

0.0004

0.0006

0.0008

0.001

0.0012

•2003:04 •2003:05 •2003:06 •2003:07 •2003:08 •2003:09 •2003:10 •2003:11 •2003:12 •2004:01

Line Graph w/forecast to 2004Line Graph w/forecast to 2004

ConclusionConclusion

Over the next ten months, the number of jobs in the finance industry should be increasing (according the model’s forecast), however at a decreasing rate.

Interpretation: Can you say, “Do you want fries with that?”