class9-06 - Class 9, Monday October 30 Econ 444, class 9...

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Class 9, Monday October 30 Econ 444, class 9 Robert de Jong 1 1 Department of Economics Ohio State University October 30, 2006 Robert de Jong Econ 444, class 9
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Class 9, Monday October 30 Example DJ i = ˆ β 0 + 0 . 10 R i - 1 + 0 . 0010 J i ( 0 . 01 ) ( 0 . 0006 ) - 0 . 017 M i + 0 . 0005 C i + . . . ( 0 . 004 ) ( 0 . 0002 ) where DJ i = percentage change in the Dow Jones on day i R i = the daily index gain or loss for day i J i = 1 if day i was in January, 0 otherwise M i = 1 if day i was a Monday, 0 otherwise C i = 1 if cloud cover 20 % , -1 if cloud cover was 100 % , 0 otherwise Robert de Jong Econ 444, class 9
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Class 9, Monday October 30 Question: does Monday affect the Dow Jones index? We look at how many standard errors 0.017 is away from 0 standard error = 0 . 004 coefficient is more than 4 standard errors is away from zero calculation: 0 . 017 / 0 . 004 = 4 . 25 > 4 Robert de Jong Econ 444, class 9
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Class 9, Monday October 30 t -value: the number of standard errors that the coefficient is away from zero. Therefore, t-value = coefficient standard error 1 t-values are the third column in Eviews output 2 sometimes t-values instead of standard errors between parentheses under coefficients 3 coefficient more than 1.96 standard errors away from zero ⇐⇒ t -value exceeds 1.96 Robert de Jong Econ 444, class 9
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Class 9, Monday October 30 Theory of linear regression: Model assumptions Coefficients are normally distributed Considering 1.96 standard errors is correct practice Robert de Jong Econ 444, class 9
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This note was uploaded on 04/13/2009 for the course ECON 444 taught by Professor Ogaki during the Fall '07 term at Ohio State.

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class9-06 - Class 9, Monday October 30 Econ 444, class 9...

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