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A Regression User’s Handbook Studenmund Chapter 11

A Regression User’s Handbook Studenmund Chapter 11. 11.1 A Regression User’s Checklist (pp. 391-392). 11.2 A Regression User’s Guide (Table 11.2). For each econometric problem, understand Its nature Its consequences for OLS estimation How to detect it How to attempt to get rid of it

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A Regression User’s Handbook Studenmund Chapter 11

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  1. A Regression User’s HandbookStudenmund Chapter 11

  2. 11.1 A Regression User’s Checklist (pp. 391-392)

  3. 11.2 A Regression User’s Guide (Table 11.2) • For each econometric problem, understand • Its nature • Its consequences for OLS estimation • How to detect it • How to attempt to get rid of it • For example, both multicollinearity and irrelevant variables can cause regression coefficients to have insignificant t-statistics

  4. 11.3 Running Your Own Regression Report • “Econometrics is best learned by doing, not by reading books, listening to lectures, or taking tests.” • “Get your hands dirty”

  5. Running your own regression project … • Choosing a topic • Applying the 6 steps in regression analysis • Writing your research report

  6. 6 Steps of Regression Analysis (p.64)-Ch.3 • Review the literature & develop the theoretical model. • Specify the model: Select the independent variables & the functional function. • Hypothesize the expected signs of the coefficients. • Collect the data. • Estimate & evaluate the equation. • Document the results.

  7. Common Elements in a Research Report • An abstract (executive summary, >100 words) • A brief introduction of the dependent variable and states the research goal. • A short review of the relevant literature. • An explanation of the model specification. • A description of the data & data sources. • A presentation of each estimated specification. • A detailed analysis of the regression results, including any econometric problems encountered. • A short conclusion that includes any policy implications or recommendations. • A reference section. • An appendix for tables that report regression results.

  8. 11.5 The Ethical Econometrican Nothing could be further from the truth! Principle: spend plenty of time to develop the theoretical underpinning and little time to “pursue” alternative estimations of that model. Reality: rare for a first attempt at estimation to be totally problem free. We are tempted to continue running regressions until you likes the way the result looks. Recommendation: report alternative estimated equations

  9. Can you handle the truth???? Q:? Why is there a Nobel Prize for economics and none for other social sciences? A:? They already have one in literature. Three econometricians went out hunting, and came across a large deer. The first econometrician fired, but missed, by a meter to the left. The second econometrician fired, but also missed, by a meter to the right. The third econometrician didn't fire, but shouted in triumph, "We got it! We got it!" More Jokes @ faculty.tamucc.edu/jlee/4310 Top 10 Reasons to Learn Econometrics

  10. Good Luck!!

  11. Ch. 6 – Model Specification Incorrect Specification • Results: Explanatory variables correlated with errors • Check: stepwise regression

  12. Ch.7 -- Functional form • To improve fit • curve • dummy variables • lagged independent variables

  13. Ch. 8 -- Multicollinearity • Check: VIF

  14. Ch 9 – Serial correlation • Result: errors not random • Check: DW statistics • Remedy: GLS

  15. Ch. 10 – Heteroskedasticity • Result: variance not constant • Check: Park or White Test • Remedy: WLS or HAC

  16. Term Paper • Due: December 11, 12:00 Noon • Format: Double-spaced contents; cover page includes an abstract of 150 words or less. • Send your paper via email to jim.lee@tamucc.edu and attach a Word file with a file name: ECON4310_LastName.doc, where LastName is your Last Name. • Please DO NOT SEND a file with a docx file extension (Vista format or newer). • You will receive acknowledgement of receipt by the end of that day; otherwise, that means I will not have received your email. • Your paper may be screened at Turnitin.

  17. What else? • Economic Scholars Program • Presentation on March 27, 2009 • At the Dallas Fed • College will most likely pay for your travel costs & expenses • Details: dallasfed.org/educate/events/2009/09esp.cfm

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