Econ103_Lec7 (2012_12_16 01_29_32 UTC)

Regress cyl eng wgt scalar r1 er2 recall that r2 08

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Unformatted text preview: ! This version of RESET adds yhat2, yhat3, and yhat4. However, it is not recommended to include so many powers of yhat because of RESET’s loss of sta:s:cal power. 18 Collineraity 1 of 5 1.  Model: MPG = β1+β2CYL+β3ENG+β4WGT+e use cars, clear! summarize! corr! 19 Collineraity 2 of 5 Model: MPG = β1+β2CYL! regress mpg cyl! 20 Collineraity 3 of 5 Model: MPG = β1+β2CYL+β3ENG+β4WGT+e! regress mpg cyl eng wgt! 21 Collineraity 4 of 5 test cyl! test eng! Individually, cyl and eng are not significant. test eng cyl! Jointly, cyl and eng are significant. 22 Collineraity 5 of 5 1.  Test for collinearity by running several Auxiliary Regressions. regress cyl eng wgt! scalar r1 = e(r2)! Recall that R2 > 0.8 regress eng wgt cyl! strong collinearity scalar r2 = e(r2)! regress wgt eng cyl! scalar r3 = e(r2)! scalar list r1 r2 r3! Separately, we cannot differen:ate the individual contribu:ons of wgt, eng, and cyl to gas mileage. 23 Indicator Variables (Descrip:on)...
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