Econometrics is a field of statistics dealing with applications to economics.

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On the use of the autocovariance generating function

The autocovariance generating function is defined as: $$g_X(z) = \sum_{h = -\infty}^{\infty} \gamma(h)z^h.$$ Where $\gamma(h)$ is the autocovariance function of the considered process $X$. I can ...
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4 views

Value added composition by sector

I am trying to make graph of value added composition by sector based on world bank data (http://data.worldbank.org/indicator/NV.SRV.TETC.ZS?display=default), but when i extracted data for industry, ...
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1answer
12 views

Estimating Markov Switching Probit

I attempt to fit the following probit model to a time series where we observe the binary variable $R_{t}$ and another variable $X_{t}$, a latent unobserved variable $y^{*}_{t}$ and a state variable ...
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1answer
31 views

An example of Instrumental Variables use

In the following example of Greene's Econometric Analysis, he writes at a certain moment: «If the number of weeks worked, and the accepted wage offer are determined jointly, then $ln Wage_{it}$ and ...
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1answer
22 views

Econometrics - Relationship between cointegration and ECM

I'm pretty new to econometrics and I've been taking a class at university which uses the book "Econometric theory and methods" by Davidson and MacKinnon. It's a pretty good book but there's one thing ...
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42 views

Time series and EViews

I have 3 questions on EViews: m, x, and y are three series. I have found that $m \sim I(1)$, and $x \sim I(2)$,and $y \sim I(2)$ Firstly, can I generate first degree difference by writing " d(m) " ...
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13 views

Standard error will increase the lower the partial $R^2$ is? [on hold]

I have one question. Is it correct that the standard eror of $\hat\beta$ will increase the lower the partial $R^2$ is? I know this is the case with the sample n, but I am not sure if it also is the ...
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20 views

Endogenous interactions in nonparametric instrumental variables

I'm interested in estimating a model along the lines of $$ pr(y==1) = g^{-1}\left(f(x_1,x_2)+X'\beta\right)+\epsilon $$ where $g$ is logit and $f$ is some smooth function. I'm using GAM's in ...
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30 views

Doubt on the Johansen Procedure and normalization of the cointegration matrix in R

I'm a beginner at Econometrics, and I'm trying to learn the main econometric techniques in R. My doubt is on how to normalize the cointegration matrix to ensure ...
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25 views

Vector autoregressive model selection process and relationship with cointegration

Let's say you're looking at two securities that trade closely with one another and you suspect you can somehow trade the spread. How can you use VAR models to estimate the relationship between the ...
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30 views

orthogonalized impulse response's contradictory forms in a VAR(p) model

I have so far discovered three different ways of utilizing the Cholesky decomposition for calculating the OIRFs of a VAR(k). The different methods seem contradictory so I would like some input on ...
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1answer
49 views

High Collinearity between Instrument and Endogenous Variable in IV Estimation: Weak Instrument Problem?

I am estimating an IV Tobit model with one endogenous variable X and one instrument Z. $$Y=X\beta+ covariates +\epsilon$$ where $cov(X,\epsilon) \ne 0$ due to endogeneity of $X$. I am using IV ...
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1answer
44 views

12 firms and a total of 204 observations, can I use pooled OLS with firm-dummies or should I use fixed factor?

I am studying the effect of government ownership on firm performance, more specifically I am studying the effect of the government reducing their share in companies which are already partly ...
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25 views

Time - series analysis data set should be converted to return or taken its Ln?

I'm studying time series in E-views. And I want to investigate Granger - causality between exports imports and economic growth. So, I'm doing causality and co-integration analysis. I have export, ...
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1answer
22 views

Ljung-Box statistic / AR-GARCH weak predictions

How would you interpret the Ljung-Box statistics in the following AR-GARCH output? What is the difference between the $R^2$ and $R$ Ljung-Box statistics? Does the GARCH model seem to be effective, ...
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1answer
45 views

Why pglm fails for within model?

Trying to run a panel logistic model. In the parameters a default NULL is specified for the "start" parameter. My model is: ...
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2answers
46 views

How to test predictive power of GARCH model

I ran the following code in R using the fGarch package to get estimated coefficients for a (1,1) model: garchFit(formula = ~ garch(1,1), data=hubtimeseries) It ...
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1answer
44 views

Significance of $1$ in the model: $Y_i=1[B_0+B_1X_i\geq \epsilon_i]$ in Binary Choice Model?

I'm having a bit of trouble understanding exactly why there is a "1" in the general simple Binary Choice Model where $Y_i$ can take a value of either $0$ or $1$. We also assume that the conditional ...
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1answer
96 views

What is the expectation: E[(2X + 3)^2 ], given E[X] = 1?

I'm taking an upper level Economics class and one of my assignments asks the question in the title. I approached it by using one property of expectation: expectation of the sum is equal to ...
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2answers
51 views

Which interpolation technique should I use?

I have an annual data set, but I have a few missing values in the series. I do not know which interpolation technique should I use to fill the missing values. ...
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2answers
61 views

Which econometric models can be used to forecast security returns + ARIMA/GARCH questions

I'm trying to write an undergraduate thesis wherein I test the predictive power of a given econometric model on a given financial time series. I need some advice on how I should go about doing this. ...
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13 views

Comparing models using coefficient of determination

What guidelines are there for when we want to compare different models using $R^2$?
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1answer
120 views

How to argue omitted variable problem is alleviated?

Is there any ways to argue that the omitted variable problem is alleviated after adding a new variable to the model? Right now I'm basically just saying that adding this new variable significantly ...
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24 views

What does lag in Johansen's test mean

Can someone please explain what are lags, what do they mean in Johansen's test?
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32 views

Dummy Interactions

To find what determines wages, I have dummy variables female, degree, Alevel etc. 1) What do I do to so see if there is any structural difference between male and female observed wages against ...
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13 views

Product Mix vs. Sales

I work for a company that sells a small portfolio of products - we'll call them toasters. These toasters vary in quality and price, but all of them will toast your food. We have historic data on our ...
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69 views

Can you leave out more than one dummy variable to have more than one variables in the reference category?

For example, in the simple OLS regression: $y = a + b_1x_1 + ... + b_kx_k + \varepsilon$ if your dummy variable $d$ has 10 categories, could you include just one dummy variable for instance: $y ...
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1answer
69 views

Can you interact the entity in fixed effects estimation?

I have estimated housing affordability (RRI) by fixed effects using the equation below: The 'r' represents regional effects and 't' represents time effects. This estimation works in Stata but are ...
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40 views

How to deal with attrition problem in panel data

I'm trying to test a certain "treatment effect" with panel survey data, and facing a problem with potential attrition bias. There are some observations from the baseline years missing in the follow-up ...
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1answer
47 views

Econometrics advice needed on unpaired t-test

There are responses of my school's alumni on the skills they perceive they acquired during the studies and are required from their job now. 18 skills evaluated from 1 to 5 (ordinal values, right?). ...
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2answers
98 views

difference between qt and qnorm

Can you tell me what is the difference between qt and qnorm? From my understanding, qt is used for small sample, and qnorm is use for large sample. Am I correct? If yes, how do I know whether my ...
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27 views

What type of dataset is this?

I have to create an econometric model for my university lecture. I want to make a logit or probit regression model trying to predict a result of a match for an ice-hockey team. (Y would be dummy ...
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1answer
40 views

How to test predictive power of ARIMA model

Once I've fitted an ARIMA model (by choosing, say, the one with the lowest AIC), how can I go about gauging how effective it is at forecasting a given financial time series? Should I somehow ...
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78 views

Multicollinearity Multiple Choice Question

I have one exam question. Anyone can answer and explain the reason for me? You are studying the following $$ Y = \beta_0 +\beta_1X_1 +β_2X_2 +u. $$ You know that the two variables $X_1$ and ...
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28 views

How to interpret “scale efficiency” in DEA?

I am reading the book Benchmarking with DEA, SFA, and R by Bogetoft and Otto. In Section 4.8 they discuss the concept of scale efficiency, and I am having trouble interpreting this concept. The ...
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15 views

Appropriateness of Using Dummy Variables To Select Quantitative Variables

I have inherited a model specification where the values of dummy variables are being used to decide the usage or omission of other quantitative variables for a given observation. This is something ...
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how to interprete the ACF/PACF plots? [duplicate]

what the result suggests of the order of the ARMA model?
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2answers
54 views

Dummy variable trap?

1) Does including both part time and temporary work cause a dummy variable trap? If not, can we exclude temporary work as an explanatory variable to explain wages in a country as the nature of work is ...
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1answer
35 views

Matching in a linear DiD setup

I am trying to determine (if any) the effect of an economics shock on a number of outcomes. In order to do this, I use the usual difference in differences setup, i.e. estimate a model of the form: $Y ...
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1answer
88 views

F-test and Rank test for underidentification

I've been performing a manual 2sls regression and I've come with the following results and that I find a bit suspicious. I've done the F-test of the first-stage regression and I've obtained a score ...
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12 views

A proper use of the Cragg-Donald F-Statistic with more than one endogenous variable

I've read that the Cragg-Donald F-Statistic is similar to an F-test on the first-stage OLS regression when you have one endogenous variable. But with more than two endogenous variables, you should use ...
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9 views

Coefficient of determination in the presence of a certain measurement error

In page 138 of Green's Econometric Analysis, we consider a simplified type of measurement error that allows the usual OLS estimator to be consistent. In the picture below that model is described. ...
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1answer
56 views

2SLS probit vs LPM

I am using 2SLS to estimate the effect of education on the probability that one works. In the first stage I regress education on my instrument and the other exogenous control variables. The same ...
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3answers
59 views

Does inconsistent causation mean inconsistent estimator?

I have this problem. I have Y (market share) and X (store size). I want to predict Y from X using a linear regression ... I run OLS to find the betas, their pvalue is meaningful, yada, yada, yada ...
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30 views

How does one interpret a demeaned log interaction term?

I am having problems interpreting my regression equation. I want to know the effect of an increase in variable $x$ on $y$ for different values of $z$, but as it's in logs and the interaction term is ...
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23 views

Regression Model Data - Changing exponential data into linear data

I have some 20 year monthly economic data that for the first couple of years is growing at a linear rate then grows at a slight exponential rate then in the last few years takes on a linear shape ...
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2answers
115 views

How to calculate the impulse response function of a VAR(1)? (With example)

How to calculate: 1) Simple IRF 2) Orthological IRF (Y2 -> Y1) Of an unrestricted VAR(1) model: $Y_{1, t} = A_{11}Y_{1, t-1} + A_{12} Y_{2, t-1} + e_{1,t}$ , $Y_{2, t} = A_{21}Y_{1, t-1} + A_{22} ...
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Two-way interaction of shared variable in econmetric

I am trying to build a fixed effect model and this is my model at the moment X + Y + Z + XY + XZ My hypotheses are interested in XY + XZ but i have consulted a few people who told me in order to ...
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38 views

The constant term after 1st differencing

My instructor stated that when the dependent variable is 1st differenced, the constant term represents the deterministic change or trend in the dependent variable. When I search for information ...
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1answer
30 views

How to show the combined effect of two covariates in a simple regression?

Say I want to build a simple model, and I have four variables available to me: Age, gender ($D_1$, 1 is female, 0 male), income, and whether the person is Hispanic or not ($D_2$, 1 is Hispanic, 0 ...