Econ 399 Chapter7b - 7.4 DV’s and Groups Often it is...

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Unformatted text preview: 7.4 DV’s and Groups Often it is desirous to know if two different groups follow the same or different regression functions-One way to test this is to use DV’s to allow for ALL different intercepts and slopes for the two groups, and test if all DV terms=0: not true is : : ... ... ,.... 2 , 1 , 2 2 1 1 2 2 1 1 H H H u DVx DVx DVx DV x x x y a k v v k k k k = 2200 = + + + + + + + + + + = δ δ δ δ δ β β β β 7.4 DV’s and Groups As we’ve already seen in our discussion of F tests, the significance or insignificance of one variable is quite separate from the joint significance of a set of variables-Therefore an F test must be done using the restricted model: u x x x y k k + + + + + = β β β β ... 2 2 1 1 However, in the case of many x variables, this results in a large number of interaction variables, and may be difficult 7.4 DV’s and Groups Alternately, one can run the regression in question (without DV’s) for the first and second group, and record SSR 1 and SSR 2-a full regression is then run with all observations included to find SSR p-a test F statistic is then formed as: )] 1 ( 2 /[ ) ( ) 1 /( )] ( [ 2 1 2 1 +- + + +- = k n SSR SSR k SSR SSR SSR F P Which is usually called the CHOW STATISTIC and is only valid under homoskedasticity 7.4 DV’s and Groups This F value is compared to F* from our tables with k+1, n-2(k+1) degrees of freedom-Note that no valid R 2 form of this equation exists-the null hypothesis as listed allows for no difference between groups-if it is not rejected, the two groups test...
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This note was uploaded on 03/14/2009 for the course ECON ECON 399 taught by Professor Priemaza during the Spring '09 term at University of Alberta.

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Econ 399 Chapter7b - 7.4 DV’s and Groups Often it is...

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