321_F11_slides5

321_F11_slides5 - Click to edit Master subtitle style Econ...

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Unformatted text preview: Click to edit Master subtitle style Econ 321-Stphanie The Simple Regression Model Chapter 2 Econ 321 Introduction to Econometrics Econ 321-Stphanie 11 Econ 321-Stphanie Outline Population regression equation Deriving the OLS Estimates Interpretation and Evaluation of Results Units of measurement and functional form Properties of OLS Econ 321-Stphanie 22 Econ 321-Stphanie Last Time Population with parameter (characteristic) for a random variable Y (household income) Random sample Y1,..,Yn Estimate with Y Make inference about population from sample information Econ 321-Stphanie 33 Econ 321-Stphanie A Conditional Model We now are interested in analyzing a variable of interest Y as a function of another variable X (bivariate regression) We establish a conditional model A model of vacation expenditure conditional on household income A model of worker productivity (job performance) conditional on training information Econ 321-Stphanie 44 Econ 321-Stphanie Econ 321-Stphanie 55 Population Regression Function Econ 321-Stphanie Formally The population mean for Y is now a function of another variable X E(Y|X) = 0 + 1 X The mathematical expression for a straight line This is our certainty model What is the statistical model? Econ 321-Stphanie 66 Econ 321-Stphanie Randomness Econ 321-Stphanie 77 Econ 321-Stphanie Population Regression Equation Dependent Variable Intercept Slope Coefficient Explanatory Variable Error yi = 0 + 1 xi + ui Econ 321-Stphanie Error or Disturbance Term What the econometrician cannot observe or measure It represents the influence of the variables other than Xi (not included in the model) Even if we observed and measured these additional factors, there would...
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321_F11_slides5 - Click to edit Master subtitle style Econ...

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