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lect1_103_2010

# lect1_103_2010 - Introduction I Econometrics Use of...

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3/29/2010 1 Introduction - I Econometrics – Use of statistical tools to analyze economic related data. Econ 41 – primarily covers statistical analysis of a single variable Econ 103 – analysis of relationships between two (or more) variables. Main tool in Econ 103: Regression analysis Introduction - II Regression analysis is used to determine the effect of one variable (e.g. X ) on another variable (e.g. Y ). Graphical illustration. It is definitely the statistical procedure of choice in formal economic research. However, it is also used quite often in the real world, as a tool to use data to inform better decisions. Many, many examples of this….

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3/29/2010 2 Introduction - III Entrepreneur trying to learn the effect of price on demand for his/her product. Marketer assessing the impact of product design decisions on sales. Lender measuring the effect of credit scores on loan default. Investment banker trying to learn how economic variables affect a particular industry’s profitability. Education administrator learning how class size affects student achievement. Lawyer establish some cause and effect using data. Manager trying to assess relative productivity of his/her workers. Stock broker learning how stocks covary for hedging purposes. Development office determining the best design of donation solicitations. Peace Corps workers trying to learn how to best distribute contraceptives or drugs Introduction - IV Regression analysis is an extremely powerful tool that allows one to use data to answer questions like this and help you make important decisions. Of course, it is not the only tool to make decisions, but it is one valuable input.
3/29/2010 3 Introduction - V Regression analysis is “hard” in one sense (lots of mathematical theory involved), “easy” in another (input data press a button in STATA ). Most of this course will involve focusing on the theory. Why? Introduction - VI While very powerful, regression analysis has many caveats. For example, it is easy to misinterpret results.

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