- 2 A Suitable Test Statistic is 3 Finding the Critical Region The null hypothesis is also known as the maintained hypothesis 4 Estimate 5 Decide

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Economic Statistics – Class Notes – 3/23/09 Recall: Estimators : “a” and “b” and thus there are (n – 2) degrees of freedom. The number of degrees of freedom depends on the number of estimators (CHECK THIS):
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Recall – A Confidence Interval for with unknown Problem: Isolate Beta ( ) in the middle to yield: Result :
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MOST IMPORTANT HYPOTHESIS TEST Q: How can I tell if X really has an effect on Y ? (Statistical significance) Answer: Use the “t” test of SIGNIFICANCE ?
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VARIABLE Y VARIABLE X Alternative Hypothesis Consumption GDP H1: > 0 (should know why this makes sense economically) Investment Interest Rate (R) H1: < 0 (should know why this makes sense economically) Labor Supply Wage H1: 0 (Don’t have to worry about the economic rationale for this one)
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Unformatted text preview: 2. A Suitable Test Statistic is: 3. Finding the Critical Region The null hypothesis is also known as the maintained hypothesis 4. Estimate 5. Decide E. Measures of Goodness of Fit From the diagram: • (yi – ybar) = the total deviation of “y” from its mean (yi – ybar) • (yi – yhat) = the “i”th residual the unexplained deviation of “y” from its mean (error) • QUESTION : Explained by what? ANSWER : Explained by the covariance between X and Y For a positive relation (Xi > Xbar). Therefore, (yi > ybar) • Xi is greater than its mean • Yi is greater than its mean NOTES: As Xi is rising above its mean, so too is Yi rising above its mean. • (See graph above)...
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This note was uploaded on 06/03/2009 for the course ECON 203 taught by Professor Casler during the Spring '09 term at Allegheny.

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- 2 A Suitable Test Statistic is 3 Finding the Critical Region The null hypothesis is also known as the maintained hypothesis 4 Estimate 5 Decide

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