Skip to main content

Questions tagged [econometrics]

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

Filter by
Sorted by
Tagged with
84 votes
10 answers
12k views

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 ...
Ari B. Friedman's user avatar
69 votes
5 answers
12k views

How exactly does a "random effects model" in econometrics relate to mixed models outside of econometrics?

I used to think that "random effects model" in econometrics corresponds to a "mixed model with random intercept" outside of econometrics, but now I am not sure. Does it? Econometrics uses terms like "...
amoeba's user avatar
  • 106k
67 votes
8 answers
19k views

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 ...
SavedByJESUS's user avatar
  • 1,233
56 votes
4 answers
101k views

What is difference-in-differences?

Difference in differences has long been popular as a non-experimental tool, especially in economics. Can somebody please provide a clear and non-technical answer to the following questions about ...
Graham Cookson's user avatar
47 votes
8 answers
229k views

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?
user avatar
47 votes
4 answers
15k views

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 ...
Graham Cookson's user avatar
45 votes
5 answers
9k views

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 ...
d_a_c321's user avatar
  • 1,259
42 votes
4 answers
78k views

When to use fixed effects vs using cluster SEs?

Suppose you have a single cross-section of data where individuals are located within groups (e.g. students within schools) and you wish to estimate a model of the form ...
QuestionAnswer's user avatar
41 votes
3 answers
11k views

Propensity score matching - What is the problem?

In estimation of treatment effects a commonly used method is matching. There are of course several techniques used for matching but one of the more popular techniques is propensity-score matching. ...
Jesper for President's user avatar
34 votes
4 answers
14k views

Is the sum of two white noise processes necessarily a white noise?

Let $a_t$ and $b_t$ be white noise processes. Can we say $c_t=a_t+b_t$ is necessarily a white noise process?
Ben Rothwell's user avatar
28 votes
2 answers
63k views

Specifying a difference in differences model with multiple time periods

When I estimate a difference in differences model with two time periods, the equivalent regression model would be a. $Y_{ist} = \alpha +\gamma_s*Treatment + \lambda d_t + \delta*(Treatment*d_t)+ \...
Tom's user avatar
  • 395
27 votes
6 answers
169k views

What is the difference between pooled cross sectional data and panel data?

They seem so similar. Are they the same thing but just referred to as different names?
Kyle's user avatar
  • 1,239
27 votes
6 answers
33k views

Why do we usually choose to minimize the sum of square errors (SSE) when fitting a model?

The question is very simple: why, when we try to fit a model to our data, linear or non-linear, do we usually try to minimize the sum of the squares of errors to obtain our estimator for the model ...
KevinKim's user avatar
  • 6,899
26 votes
5 answers
15k views

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 don'...
user avatar
26 votes
13 answers
36k views

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 ...
26 votes
7 answers
3k views

Explain in layperson's terms why predictive models aren't causally interpretable

Imagine that you are asked to infer some causal effect -- a change in an outcome $y$ in response to some variable $x$. But, the person asking for this directs you to use a predictive model to do so. ...
generic_user's user avatar
  • 13.5k
25 votes
3 answers
11k views

How does it make sense to do OLS after LASSO variable selection?

Recently I have found that in the applied econometrics literature, when dealing with feature selection problems, it is not uncommon to perform LASSO followed by an OLS regression using the selected ...
ZLIU's user avatar
  • 326
24 votes
5 answers
54k views

What is simply meant by reduced form?

In econometrics, what is meant by reduced form? Also, what are people looking for when they say "I would like to see the reduced form estimates." This has been thrown around at work and individual ...
LF12's user avatar
  • 539
24 votes
4 answers
2k views

The magic money tree problem

I thought of this problem in the shower, it was inspired by investment strategies. Let's say there was a magic money tree. Every day, you can offer an amount of money to the money tree and it will ...
ElectronicToothpick's user avatar
23 votes
2 answers
24k views

Are log difference time series models better than growth rates?

Often I see authors estimate a "log difference" model, e.g. $\log (y_t)-\log(y_{t-1}) = \log(y_t/y_{t-1}) = \alpha + \beta x_t$ I agree this is appropriate to relate $x_t$ to a percentage change in $...
A. Smith's user avatar
  • 231
23 votes
3 answers
6k views

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 ...
gappy's user avatar
  • 5,630
21 votes
5 answers
54k views

Why is my R-squared so low when my t-statistics are so large?

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 seems irrelevant to include the decimals) which are ...
Kyle's user avatar
  • 1,239
21 votes
4 answers
15k views

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'?
Flying pig's user avatar
  • 6,299
21 votes
3 answers
13k views

Utility of the Frisch-Waugh theorem

I am supposed to teach the Frish Waugh theorem in econometrics, which I have not studied. I have understood the maths behind it and I hope the idea too "the coefficient you get for a particular ...
Anthony Martin's user avatar
20 votes
2 answers
552 views

Can regularization be helpful if we are interested only in modeling, not in forecasting?

Can regularization be helpful if we are interested only in estimating (and interpreting) the model parameters, not in forecasting or prediction? I see how regularization/cross-validation is extremely ...
Adrian's user avatar
  • 4,374
18 votes
5 answers
4k views

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 ...
Jyotirmoy Bhattacharya's user avatar
18 votes
4 answers
33k views

How to keep time invariant variables in a fixed effects model

I have data on a large Italian firm's employees over ten years and I would like to see how the gender gap in male-female earnings has changed over time. For this purpose I run pooled OLS: $$ y_{it} = ...
user42263's user avatar
  • 183
18 votes
5 answers
34k views

What's the difference between time-series econometrics and panel data econometrics?

This question may be very naive, but the way I'm taught econometrics I'm very confused if there's a difference between time-series and panel data method. Regarding time series, I've covered topics ...
Heisenberg's user avatar
  • 4,600
18 votes
2 answers
33k views

Persistence in time series

Could someone tell me what the term 'persistence' mean in time series analysis? It's regarding econometrics and applied regression.
bskard's user avatar
  • 283
18 votes
3 answers
8k views

Introductory texts on structural econometrics

In recent years the structural approach to econometrics compared to reduced form econometrics has become more popular. This involves tight combination of theoretical economic models and statistics in ...
Andy's user avatar
  • 19.2k
18 votes
2 answers
998 views

How would econometricians answer the objections and recommendations raised by Chen and Pearl (2013)?

In their article, Chen and Pearl (2013), critically examined 6 econometric textbooks, among these the textbooks written by Wooldridge (2009) {the introductory book}, and Stock & Watson (2011). ...
ColorStatistics's user avatar
17 votes
3 answers
3k views

Literature on IV quantile regression

In the last months I have read intensively about quantile regression in preparation for my master thesis this summer. Specifically I have read most of Roger Koenker's 2005 book on the topic. Now I ...
AlexH's user avatar
  • 976
17 votes
3 answers
29k views

Difference-in-differences with individual level panel data

What is the correct way to specify a difference in difference model with individual level panel data? Here is the setup: Assume that I have individual-level panel data embedded in cities for multiple ...
greg's user avatar
  • 268
16 votes
3 answers
33k views

Why doesn't measurement error in the dependent variable bias the results?

When there is measurement error in the independent variable I have understood that the results will be biased against 0. When the dependent variable is measured with error they say it just affects the ...
TomCat's user avatar
  • 163
16 votes
5 answers
13k views

How to model prices?

Cross-posted at Math.SE. I'm working on a hobby project and would need some help with the following problem. A bit of context Let's say there is a collection of items with a description of features ...
murrekatt's user avatar
  • 333
16 votes
3 answers
32k views

When should one consider using GMM?

One of the things which makes econometrics unique is the use of the Generalized Method of Moments technique. What types of problems make GMM more appropriate than other estimation techniques? What ...
Ari B. Friedman's user avatar
16 votes
4 answers
4k views

Is it a valid claim, that by differencing a time series, it loses its memory, and as a result its predictive power?

Marcos Lopez de Prado seems to be a well known and renowned machine learning expert in the field of finance. I am very far from his level, as have not yet finished my PhD in economics, and only have ...
Betelgeux's user avatar
15 votes
2 answers
3k views

Why do researchers in economics use linear regression for binary response variables?

Lately, I have had to read several papers in economics (a field that I'm not too familiar with). One thing that I've noticed is that even when the response variable is binary, linear regression models ...
MånsT's user avatar
  • 12k
15 votes
1 answer
35k views

Interpretation of ivreg() diagnostics in R

I'm trying to wrap my head around interpreting the diagnostics of the ivreg() command in R, from the {AER} package. Running the example code provided in the help ...
Miguel's user avatar
  • 153
15 votes
2 answers
3k views

Causality in microeconometrics versus granger causality in time-series econometrics

I understand the causality as used in microeconomics (in particular IV or regression discontinuity design) and also the Granger causality as used in time-series econometrics. How do I relate one with ...
user227710's user avatar
15 votes
2 answers
13k views

Interpret Regression Coefficients After various Differencing

There are few explanations I can find that describe how to interpret linear regression coefficients after differencing a time series (to eliminate a unit root). Is it just so simple that there is no ...
B_Miner's user avatar
  • 8,800
15 votes
1 answer
41k views

difference-in-differences with fixed effects

I have two questions related to having fixed effects in the DD model. I have a treatment that occurs at different times (e.g., 2001, 2005, etc.). I want to fit a DD model, so I standardize the ...
doremonblue's user avatar
15 votes
1 answer
2k views

Is Just-Identified 2SLS Median-Unbiased?

In Mostly Harmless Econometrics: An Empiricist's Companion (Angrist and Pischke, 2009: page 209) I read the following: (...) In fact, just-identified 2SLS (say, the simple Wald estimator) is ...
Elias's user avatar
  • 1,089
15 votes
2 answers
2k views

Spatial autocorrelation versus spatial stationarity

Let's assume we have points in two-dimensional space, and we wish to measure the effects of attributes $X$ on attribute $y$. The typical linear regression model is of course $$y= X\beta + \epsilon$$ ...
gregmacfarlane's user avatar
15 votes
2 answers
1k views

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 ...
Jase's user avatar
  • 2,266
14 votes
6 answers
14k views

What is the difference between econometrics and statistics?

It's never been very clear to me what distinguishes econometrics from statistics. My preliminary understanding was that statistics is data-focused whereas econometrics always starts from theory. But ...
FightMilk's user avatar
  • 412
14 votes
1 answer
16k views

Predicting ordered logit in R

I'm trying to do an ordered logit regression. I'm running the model like so (just a dumb little model estimating number of firms in a market from income and population measures). My question is ...
prototoast's user avatar
14 votes
2 answers
31k views

Standard errors of a two stage least squares regression, Stata

I use Stata. I am trying to replicate the ivreg output of a regression performing manually the first stage, predicting the instrument after the first stage and running the second stage regression with ...
Charlie's user avatar
  • 501
14 votes
5 answers
2k views

Textbook for Bayesian econometrics

I am looking for a theoretically rigorous textbook on Bayesian econometrics, assuming a solid understanding of frequentist econometrics. I would like to suggest one work per answer, so that ...
14 votes
1 answer
27k views

What does strict exogeneity condition of OLS really mean?

In Hayashi's Econometrics, it is stated that one of the assumption of classical OLS is: $$\mathbb{E}(\epsilon_i\lvert\mathbf{x_1}, \mathbf{x_2}, \ldots, \mathbf{x_n}) = 0 \text{, for } i=1, \ldots, n. ...
hans-t's user avatar
  • 569

1
2 3 4 5
52