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class8-06

# class8-06 - Econ 444 Econ 444 Wednesday October 25 Robert...

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Econ 444, Econ 444, Wednesday October 25 Robert de Jong 1 1 Department of Economics Ohio State University Robert de Jong Econ 444, Econ 444, Wednesday October 25

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Previous class: GRE scores: are GRE and SAT biased against women and ethnic groups? hatwide GRE i = 172 . 4 + 39 . 7 G i + 78 . 9 GPA i ( 10 . 9 ) ( 10 . 4 ) + 0 . 203 SATM i + 0 . 110 SATV i ( 0 . 071 ) ( 0 . 058 ) GRE i = score of i th student on test G i = 1 if student is male, 0 otherwise GPA i = GPA in economics classas SATM i = score on SAT-mathematical SATV i = score on SAT-verbal Robert de Jong Econ 444, Econ 444, Wednesday October 25
Things to note on previous transparency 1 Dummy variable : a variable that takes on the values 0 and 1 only ( male/female dummy ) This means that if G i = 1 - i.e. for a man - we predict a higher GRE score than if G i = 0 (i.e. a woman) 2 Between parentheses: standard errors (we get those from Eviews output too!) Standard errors measure the statistical uncertainty in the coefficient cf. margin of error in the Bush-Kerry election 95% confidence interval (likely values for the coefficient): coefficient plus or minus 1.96 times the standard error Robert de Jong Econ 444, Econ 444, Wednesday October 25

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Mileage per gallon of various cars ˆ G i = 22 . 008 - 0 . 002 W i - 2 . 76 A i + 3 . 28 D i + 0 . 415 E i ( 0 . 001 ) ( 0 . 71 ) ( 1 . 41 ) ( 0 . 097 ) where G i = mileage per gallon as tested W i = gross weight of car, in pounds A i = 1 if car has automatic transmission, 0 otherwise D i = 1 if car has diesel engine, 0 otherwise E i = EPA estimate of mileage per gallon Robert de Jong Econ 444, Econ 444, Wednesday October 25
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 % ,

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