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4-15-09

# 4-15-09 - … against the residuals – error terms and...

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Economic Statistics – Class Notes – 4/15/09 9.) b.) Heteroskedasticity – “different spread” = a situation in which the variance of errors (the true variance of errors from our population model ) is not constant 1. Effect : OLS (Ordinary Least Squares) estimators are still unbiased but NO LONGER most efficient this means that there are other estimators that are out there a. Least squares = minimize the sum of squared errors 2. Detection – graphical techniques a. Plot the predicted values of “y” , (predicted value of y are those values of y that appear on the regression line

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Unformatted text preview: … against the residuals – error terms and look for a pattern: Note – heteroskedasticity is most often associated with cross sectional data Two types of data: • Time series (data collected over a period of time) over a “series of times” • Cross sectional (data collected over a single time period across a group of individuals) YOU ARE RESPONSIBLE FOR KNOWING THE FOLLOWING: • What the problem is, its EFFECT and its DETECTION 3. Correction – Use generalized least squares (deals with the topic of econometrics )...
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4-15-09 - … against the residuals – error terms and...

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