Econometrics Final

How does less variation affect the regression?

Increases standard error.

Attenuate

• Coefficient is biased towards zero making it an underestimation.

• Occurs when innaccurately reporting higher and lower.

What does substantial coefficient change across regressions imply?

The presence of OVB.

Probit Model

A nonlinear function where probabilities lie between 0 and 1.

Panel Data

• Tracks the same variables and units over time.

• Includes fixed effects which control OVB.

How would you calculate a squared polynomial coefficient?

Coefficient * (#²)

Types of Regressions

• Linear, nonlinear, quadratic, probit.

• Make sure to state when comparing and stating preferred regression.

Explain if a variable causes OVB.

If a variable affects both the x and y variable (explain how specifically), it causes OVB.

Simultaneous Causality

X affects y and y affects x.

Does missing data cause bias?

• Doesn’t cause bias if the missing data just reduces sample size without making the estimates biased.

• Causes bias if the x variable is missing based on observed variables/unobserved factors.

How to determine direction of bias?

• Based on the y variable.

  • If x increases, but y remains low, its an underestimation.

  • If x decreases, but y remains high, its an overestimation.

Calculate economic significance

(coefficient / mean) * 100 = % = economic significance

Calculating Probit Model Coefficients

Translate normal calculations through the Cumulative Standard Normal Distribution Table on the back of the test.

Writing Null and Alternative Hypothesises

• Write as equations.

• H₀: x₁ + x₃ = 0

• H₁: x₁ + x₃ /=/ 0

Explaining omitted variable bias within contexts

• Define OVB using the variables in the experiment.

• OVB occurs if the variable is correlated with the x and y variable.