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class14-06

# class14-06 - Econ 444 Monday November 13 class 14 Econ 444...

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Econ 444, Monday November 13, class 14 Econ 444, Monday November 13, class 14 Robert de Jong 1 1 Department of Economics Ohio State University Robert de Jong Econ 444, Monday November 13, class 14

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Econ 444, Monday November 13, class 14 Class program October 17 Return takehome # 4 Review of Monday’s class New material: F -test Robert de Jong Econ 444, Monday November 13, class 14
Econ 444, Monday November 13, class 14 Fourth homework 1 Yes: 22 . 56 > 1 . 96, so reject the null. 2 Yes: 22 . 56 > 2 . 56, so reject the null. 3 t -value < 1 . 96. 4 A little bigger than 5%: 1 . 645 < 1 . 73 < 1 . 96, so between 10% and 5% 5 No: 1 . 73 < 1 . 96, so we cannot reject. 6 No: 1 . 73 < 2 . 56, so we cannot reject. Robert de Jong Econ 444, Monday November 13, class 14

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Econ 444, Monday November 13, class 14 Data mining In practice, we need to search for a decent specification Example: in wage equation, do we include geographic dummy variables, sector of employment, education of parents etc.? We should not be searching and searching for the best-looking equation Data mining: searching for the best specification by exhausting all possible equations that can be estimated Data mining in econometrics is a bad thing: this invalidates inference Robert de Jong Econ 444, Monday November 13, class 14
Econ 444, Monday November 13, class 14 Recommendation: Try a sensible specification first, and only change it if this is what the data suggest Example: geographic dummy variables are deemed irrelevant: leave them out, and perhaps try a regression with them included to see if they are significant Then if t -values suggest they are relevant, change the original plan Robert de Jong Econ 444, Monday November 13, class 14

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Econ 444, Monday November 13, class 14 Olympic games and medals Question: which country did best? Data for: 1 Number of medals for every country in 2004 Olympics 2 GDP per capita for every country 3 Population How do we proceed? Robert de Jong Econ 444, Monday November 13, class 14
Econ 444, Monday November 13, class 14 1 What should be our Y i and what should be our X i ?

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