Mlr-further issues - MLR Further Issues MLR 1 2 3 Functional Forms Adjusted R-squared Heteroskedasticity A Functional Forms capture non-linearities

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MLR : Further Issues MLR : Further Issues 1. Functional Forms 1. Functional Forms 2. Adjusted R 2. Adjusted R - - squared squared 3. 3. Heteroskedasticity Heteroskedasticity
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A. Functional Forms A. Functional Forms capture non-linearities 1. Log 1. Log -functional forms functional forms more possibilities in interpretation y : level, x : level marginal effect y : log, x : level semi – elasticity x = 1 100( β ) % y : log, x : log elasticity x = 1% β % 2. Quadratics 2. Quadratics decreasing/increasing marginal effects l l l l 2 01 2 yx x β ββ =+ + l l 12 2~ marginal effect of x on y x x l l l 1 2 :0 2 y inflection point x x ∆− =⇔ =
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3. Models with interaction terms. 3. Models with interaction terms. marginal effect of a x depends on the magnitude on another x. e.g. if ( sqrtft ) = 0 not interesting interpretation reparameterization e.g. l l l l l 01 12 23 1 2 () yx x x x ββ β =+ + + n l l l l 2 3 ( ) ( ) hprice sqrtft rooms sqrtft rooms + + n l l hprice sqrtft rooms 1 2 x x x u + + + 2 3 11
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This note was uploaded on 08/27/2011 for the course ECON 7043 taught by Professor Projim during the Three '11 term at University of Adelaide.

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Mlr-further issues - MLR Further Issues MLR 1 2 3 Functional Forms Adjusted R-squared Heteroskedasticity A Functional Forms capture non-linearities

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