# Tagged Questions

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

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### Is the R language reliable for the field of economics?

I am a graduate student in economics who recently converted to R from other very well-known statistical packages (I was using SPSS mainly). My little problem at the moment is that I am the only R user ...
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### What are the major philosophical, methodological, and terminological differences between econometrics and other statistical fields?

Econometrics has substantial overlap with traditional statistics, but often uses its own jargon about a variety of topics ("identification," "exogenous," etc.). I once heard an applied statistics ...
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### Is machine learning less useful for understanding causality, thus less interesting for social science?

My understanding of the difference between machine learning/other statistical predictive techniques vs. the kind of statistics that social scientists (e.g., economists) use is that economists seem ...
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### What is the difference between PCA and asymptotic PCA?

In two papers in 1986 and 1988, Connor and Korajczyk proposed an approach to modeling asset returns. Since these time series have usually more assets than time period observations, they proposed to ...
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### Can the empirical Hessian of an M-estimator be indefinite?

Jeffrey Wooldridge in his Econometric Analysis of Cross Section and Panel Data (page 357) says that the empirical Hessian "is not guaranteed to be positive definite, or even positive semidefinite, for ...
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### Why is my R-squared so low when my t-statistics are so large?

I feel this may be a slightly dumb question but I ran a regression with 4 variables, and all are very statistically significant, with T values $\approx 7,9,26$ and $31$ (I say $\approx$ because it ...
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### Irregularly spaced time-series in finance/economics research

In financial econometrics research, it is very common to investigate relationships between financial time series that take the form of daily data. The variable will often be made $I(0)$ by taking the ...
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### Good econometrics textbooks?

Which good econometrics textbooks would you recommend? edit: There are quite a few books out there, with varying levels of mathematical sophistication. It would be good to get some idea of how ...
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### What is the reason why we use natural logarithm (ln) rather than log to base 10 in specifying function in econometrics?

What is the reason why we use natural logarithm (ln) rather than log to base 10 in specifying functions in econometrics?
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### When is quantile regression worse than OLS?

Apart from some unique circumstances where we absolutely must understand the conditional mean relationship, what are the situations where a researcher should pick OLS over Quantile Regression? I ...
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### Documented/reproducible examples of successful real-world applications of econometric methods?

This question might sound very broad, but here is what I am looking for. I know there are many excellent books about econometric methods, and many excellent expository articles about econometric ...
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### How to model prices?

I asked this question on the matemathics stackexchange site and was recommended to ask here. I'm working on a hobby project and would need some help with the following problem. A bit of context ...
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### Random assignment: why bother?

Random assignment is valuable because it ensures independence of treatment from potential outcomes. That is how it leads to unbiased estimates of the average treatment effect. But other assignment ...
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### Linear regression, heteroscedasticity, White's test interpretation?

I am trying to test whether my regression has an issue of heteroscedasticity. After running a regression, I can clearly see that the residual plot has a pattern. After taking a log of the dependent ...
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### How to combine the forecasts when the response variable in forecasting models was different?

Introduction In forecasts combination one of the popular solutions is based on the application of some information criterion. Taking for example Akaike criterion $AIC_j$ estimated for the model $j$, ...
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### What is an instrumental variable?

Instrumental variables are becoming increasingly common in applied economics and statistics. For the uninitiated, can we have some non-technical answers to the following questions: What is an ...
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### In regression analysis what's the difference between data-generation process and model?

In regression analysis what's the difference between 'data-generation process' and 'model'?
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### How to do a 'beer and diapers' correlation analysis

I have data that is equivalent to: shopper_1 = ['beer', 'eggs', 'water',...] shopper_2 = ['diapers', 'beer',...] ... I would like to do some analysis on this ...
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### Using econometrics, how do I solve out the endogeneity problem?

I had a project from before I graduated from college that was effectively me acting as a research aid to a politician. The project served as my senior thesis, as well. The portion of the report that I ...
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### Gini coefficient and error bounds

I have a time series of data with N=14 counts at each time point, and I want to calculate the Gini coefficient and a standard error for this estimate at each time point. Since I have only N=14 counts ...
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### Unique (?) idea for forecasting sales

I'm working on developing a model to predict total sales of a product. I have about a year and a half of bookings data, so I could do a standard time series analysis. However, I also have a lot of ...
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### What is the difference between spatial dependence and spatial heterogeneity?

What is the difference between spatial dependence and spatial heterogeneity? My question is motivated by readings in model specification problems in spatial econometrics, in particular Anselin ...
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### Does zero correlation between 2 differenced series implies no cointegration between original series?

The question is related to this one. In this question @mpiktas gives an answer on why checking correlation is not enough but the answer doesn't seem completely correct to me for the following reason: ...
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### Is there a method to find what is a good sample size for a VAR-model?

This question might be way off base as I am just getting to know vector autoregressive models, but I've tried searching through the usual channels and if this actually is a valid question it might be ...
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### Conditional homoskedasticity vs heteroskedasticity

From Econometrics, by Fumio Hyashi (Chpt 1): Unconditional Homoskedasticity: The second moment of the error terms E(εᵢ²) is constant across the observations The functional form E(εᵢ²|xi) is ...
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### How do I show that $(\hat{\beta_1}-\beta_1)$ and $\bar{u}$ are uncorrelated, i.e. that $E[(\hat{\beta_1}-\beta_1) \bar{u}] = 0$?

I asked this question and thought I found a solution to it by working through the steps in my textbook. Unfortunately the comments told me that I was completely wrong and only got the proof to work by ...
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### Does it make sense to “cluster” when you use a regression discontinuity?

One of the breakthroughs of econometrics over the past two decades has been to employ "clustering" to take into account the correlation of error terms across observations. For instance, if you're ...
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### Imputing a missing variable based on common variables with another data set

I have 2 data sets: $A$ and $B$. The variables are common to both data sets with the exception of two, which are both missing in A. Let's call those two additional variables: $b_1$ and $b_2$. We ...
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### Asymptotic Theory in Economics

I am interested in deepening my Asymptotic Theory understanding. My current knowledge is that of a typical PhD student (from a decent University), say at the level of Green's textbook. Are there any ...
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### Estimating demand elasticity econometrically

When specifying a production function for regression, it is well known that one of the features of using a log-log model is that the estimated coefficients are the output elasticities w.r.t. their ...
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### Which Dickey-Fuller test should I apply to a time series with an underlying model that includes an intercept/drift term and a linear time trend?

Short version: I have a time series of climate data that I'm testing for stationarity. Based on previous research, I expect the model underlying (or "generating", so to speak) the data to have an ...
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### Persistence in time series

Could someone tell me what the term 'persistence' mean in time series analysis? It's regarding econometrics and applied regression.
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### Statistics and econometrics distance learning

I would be very glad if someone can point me out to statistics and econometrics distance learning courses like http://www2.statistics.com. Thanks in advance