AAE526: Quantitative Methods

*** Fall 2011 Course Syllabus ***

Instructor:

Dr. Tom Cox
Room 520 Henry Taylor Hall,
427 Lorch Street, CAMPUS
Phone: 262-9493 (If more than three rings, I'm not in !!!).
EMAIL: TCOX@WISC.EDU

Class Time/Place:    M/W/F 9:55-10:45 Room 1143, Mechanical Engineering

Office/Lab Hours:    MWF: 8:30-9:30 Engineering Hall Cafeteria (1^st Floor, Left of MAIN Entrance).
                                  MF: 11-2, 520 Henry Taylor Hall (by appointment)
                                  TTH: 11-2, 520 Henry Taylor Hall (by appointment)  

Computer Lab:         HECC (Henry Taylor Hall Basement): Wed, 11-1, 3-5, 7-9 (choose one).

Class WEB-Site:        www.aae.wisc.edu/aae526/main.asp

Required Textbooks:
o   Cliff T. Ragsdale, Spreadsheet Modeling and Decision Analysis: A Practical Guide to Management Science. 5^th Edition.
o   Berk and Carey, DATA ANALYSIS with Microsoft EXCEL 2007. 3^rd Edition.
*         STATPLUS zip file

  Course Pre-Requisites: ECON 301 or equivalent, or consent of instructor. This course will be fairly computer intensive using EXCEL 2007 as well as several EXCEL "add-ins" (Solver, Crystal Ball, etc.). If you do not have a good working understanding of Windows Office 2007 (EXCEL 2007 in particular), the Data Analysis with Microspft EXCEL 2007 text provides an excellent, self directed primer (but will take additional time/commitment to master: get started on this exercise ASAP).

Course Objectives: This course provides a Senior/Masters level introduction to applied quantitative methods with a focus on agriculture related examples. In particular the course seeks to apply the general principles and tools of matrix algebra, statistics and decision analysis (optimization and simulation) to agricultural/resource issues from a quantitative/management oriented perspectives. The course stresses "hands on" applications of analytical methods, concepts and techniques to gain a thorough understanding of the economic principles and methodologies underlying business decision-making. There will be extensive computer based assignments using spreadsheet and statistical software using Windows/EXCEbased personal computers.

Computer Lab: A two-hour per week computer lab is required of all students. These labs will be offered multiple hours each week (Wed 11-1, 3-5 and 7-9) and will cover the computer skills required for the end of chapter questions and the homework assignments. Plan to come to attend (or more, as needed) of these lab sessions – they are absolutely vital to class objectives.

Grading: There will be one mid-term exam and a cumulative final exam. The midterm will cover Weeks 1-7. There will be multiple homework assignments from questions at the end of each chapter. Most of these assignments will require extensive computer work that will be discussed in class as well as during lab times. Your final grade will be a weighted average of the midterm and final exams, and the average grade of the take home assignments. The exams and each homework will be graded on the basis of 100 points. The relative weights for the composite, final grade will be:
o   Take Home (TH) Midterm Exam: 25%
o   Average of Homework Assignments: 50%
o   Cumulative TH Final Exam: 25%  

Summary: This course should provide you with a very "hands-on" introduction to applied quantitative methods using Excel spreadsheets. I encourage you to consider this class an introduction and to further acquire a deeper understanding of these tools with additional class work and applications.

Web-Sites:
o   The class website (http://aae.wisc.edu/aae526/main.asp) will contain this syllabus, required spreadsheet files, and class lecture overheads. Please visit the site it you miss a class/lecture.
o   The text website Ragsdale 5th Edition provides limited additional information.

Please feel free to stop by my office and chat during office hours, or make an appointment to visit.

Lastly, ASK QUESTIONS if/when needed. Good Luck. I hope we have a fun and productive semester.

This Web-Page works well under Netscape/Firefox !!!

CLASS Google/Email Open-Sourced Readings !!!

Hal Varian:

• Information Rules!!!
• NYT Articles
• McKinsey Institute Interview
• Condliffe Menorial Lectture (podcast)
  
  

The New Normal:
o   Welcome to the New Normal Implications for the investor.
o   Cargill Newsletter The “new normal” from a brand management/marketing perspective.

Black Swans:
o   Joe Nocera NYTimes
o   WIKI: Black Swan
o   Inteview w/ Taleb  

Other/EXCEL/Lab:
o   Matrix Operations in EXCEL 2007  

TH MT Readings/Links:
o   False Positives: Lyme (Isthmus/pdf) Social costs of false negatives.
o   Weak/Strong Priors/Posteriors (link: read the follow up discussions) Nobel Prize: “skyhook” versus correspondence with “reality”???

Joel Karlin: Western Milling Newsletter. 
One of my gurus of Ag Supply/Demand Balance using the best of KGP (IMHO). Sells feed ingredients to large California dairies as well as provides futures/hedging services on both feeds and dairy. Look for his key tools via tables, charts, and “value added”/qualitative insights:

• Trends: deviations from trend (average, 5-10 year averages, moving averages)
• Changes and % Changes: YoY (Year on Year), YTD (year to Date), Monthly/Quarterly/Annually, relative to 1-2 standard deviations from the mean (i.e., 67 and 95% Confidence Intervals).
• Consider the Source: “Trade” (people like him) versus “USDA” (party-line, official), differences in methodology, politics, historical context (over/under shoot tendencies), etc.

2011 Weekly Newsletters:

• Western letter 8-22-11.pdf
• Western letter 9-6-11.pdf

John Mauldin: Outside the Box and Thoughts from the Frontlines (Weekly Blogs).
John Mauldin is another one of my macro/global gurus for business/financial trends, insight, and awareness – from a global hedge fund perspective.  Brilliant, hard-nosed, hard hitting, no holds barred – and personable!!!

• Kicking the Can Down the Road One More Time - Thoughts from the Frontline Investment Newsletter - John Mauldin.pdf 
• Converging On The Horizon - Outside the Box Investment Newsletter - John Mauldin.pdf 
• Mauldin -- Dynamic Economic Decision Making.pdf 
• Zen Lessons in Market Analysis  (pdf)

McKinsey Institute: Huge, cutting edge, state of the art, applied business analysis: analytical, aggregate/disaggregate (sectors, regions, themes), applied academic/business perspectives.

• Use-Abuse of Scenarios (pdf)
• Risk Around the Corners (pdf)  

STRATFOR: Free Weekly Blog
Snapshots of the power of the geo-political perspective at its finest -- the intersection of people and place, historical context, and national/strategic interests. A vital (qualitative) part of the KGP dialectic. I especially enjoy el toro viejo (the old bull (man) and owner), George Friedman.

• Germany's Choice Both.pdf:  This is a longer two part series (combine here) that provides “qualitative background to the EU/EURO situation. Read with the first two of the Mauldin pdfs.

4^th Edition Files (Chapter Figures):

• 4^th Edition Files  (zip: 26 MB !!!)

TENTATIVE SCHEDULE
NOTE: Downloadable links are in BLUE !!!

Week 0:       Welcome, Introduction, Math/Stats Review

Readings:
Ragsdale, Chapter 1, Introduction to Modeling and Decision Analysis. Start.
* Lecture (ppt): 1/page.
* Chapter 1 (annotated pdf): 16 pages.

McKinsey/Mauldin Readings:
* Zen Lessons in Market Analysis  (annotated pdf)
* Use-Abuse of Scenarios (annotated pdf)

EXCEL REVIEW !!!
 Berk and Carey: Chapters 1-3 (see below). These chapters are our 1^st priority.
Additional DoIT EXCEL 2007 Online Review Materials: The Berk and Carey should be sufficient. The links below provide on-line/video alternatives.
o   DoIT STS Link: http://www.doit.wisc.edu/training/student/calendar.aspx You can sign up for ”free” (opportunity cost of time!!!) classes via DoIT here.
o   DoIT STS 2007 Files: EXCEL 2007 Tutorials (7.4 M zip).
o   DoIT On-line Video Training: EXCEL 2007 Essential Training (link/html)
o   EXCEL 2007 Essential Training Data Files (link/zip)
o   DoIT On-line Video Training: EXCEL 2007 Financial Analysis (link/html)
o   EXCEL 2007 Financial Analysis Data Files (link/zip)

“Homework”/Lab:
Review Ragsdale Chapter 1 Problems 1-26.
Berk and Carey: Start working these chapters on your own ASAP. We will spend some lab time on them as needed.
o   Chapter 1 (Getting Started with Excel): Chapter 1 Data
o    Chapter 2 (Working With Data): Chapter 2 Data
o   Chapter 3 (Working With Charts): Chapter 3 Data
GOOGLE: dialectic (Hegelian dialectic), duality (mathematical duality), heuristic, the "art of the long view".
EXAMPLES:

Week 1:    Math/Stats Review

Readings/Lectures:

o    Ragsdale, Chapter 1, Introduction to Modeling and Decision Analysis. Done/Review.
Linear Algebra: Start/Finish.
* Lecture: Review of Linear Algebra (pdf): 1/page, 2/page.
* Associated Reading: Kristensen Advanced Herd Management; Appendix-B (pdf)

Statistics I: Start.
* Lecture: Review of Statistics I (pdf): 1/page, 2/page.
* Assocaiated Reading: Kristensen Advanced Herd Management; Appendix-A (pdf). (with my highlights/comments)!!!

Homework/Lab:
o   Exercise: Linear Algebra (pdf): 1/page.
o   HMWK1: Answer above Exercises 1, 2, 3 using Excel. Due 1 week from Friday (9/17) = ~1.5 lab sessions.
 

Self Study/EXCEL Review:
o   Berk and Carey: Complete Chapters 1-3.
o   Matrix Operations in EXCEL 2007

Week 2:   Math/Stats Review

Readings:

o   Ragsdale, Chapter 1: Done/Review.

o   Statistics I: Done/Review.
Statistics II: Start.
* Lecture: Review of Statistics II (pdf): 1/page, 2/page.
* Associated Reading: Kristensen Advanced Herd Management; Appendix-C (pdf) (with my highlights/comments)!!!

Homework/Lab:
o   Exercircise: Statistics I (pdf): 1/page.
o   HMWK2: Answer 1:1-6, 2-1, 3-1, 4-1 using Excel. Due 1 week from Friday (9/24) = ~1.5 lab sessions.Hmwk 1 Due Friday 9/17 !!!