27 - Lecture 6

27 - Lecture 6 - Introduction to Econometrics Econ 322...

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Unformatted text preview: Introduction to Econometrics Econ 322 Summer, 2011 Ruby HENRY June 27, 2011 Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 1 / 1 Part I - Topics Covered Homoscedasticity and Heteroscedasticity Hypothesis testing Con&amp;dence Intervals Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 2 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: E ( e i j X ) = 0 for each i Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: E ( e i j X ) = 0 for each i the sample is random Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: E ( e i j X ) = 0 for each i the sample is random X and e have &amp;nite fourth moments Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: E ( e i j X ) = 0 for each i the sample is random X and e have &amp;nite fourth moments Lets now think about the regression error, e i . Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: E ( e i j X ) = 0 for each i the sample is random X and e have &amp;nite fourth moments Lets now think about the regression error, e i . In almost every econometrics text book you will see the following assumption about the distribution of the regression error. It is commonly referred to as an assumption of homoscedasticity . Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Some Additional Assumptions So far we have made very few assumptions. Our assumptions so far are: E ( e i j X ) = 0 for each i the sample is random X and e have &amp;nite fourth moments Lets now think about the regression error, e i . In almost every econometrics text book you will see the following assumption about the distribution of the regression error. It is commonly referred to as an assumption of homoscedasticity . We assume that e i &amp; ( , 2 e ) for all i . This assumption states that the regression error for each observation is identically distributed with the same variance. Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 3 / 1 Homoscedasticity Assumption Implications of this assumption Ruby HENRY () Introduction to Econometrics Econ 322 Summer, 2011 June 27, 2011 4 / 1 Homoscedasticity Assumption Implications of this assumption If we assume that the regression error is homoscedastic then we can...
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This note was uploaded on 09/29/2011 for the course ECON 322 taught by Professor Francisco during the Summer '07 term at Rutgers.

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27 - Lecture 6 - Introduction to Econometrics Econ 322...

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