Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
THE UNIVERSITY OF WESTERN ONTARIO
LONDON
CANADA
Department of Economics
Economics 2123B 002
Assignment #1
1)
What is the distinction between the error term and the residual? Show that the expected
value of the residual ut is zero. Be sure to explain what
Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
ECONOMETRICS NOTES
CHAPTER 4 LINEAR REGRESSION WITH ONE REGRESSOR
OUTLINE
1.
2.
3.
4.
5.
The population linear regression model
The ordinary least squares (OLS) estimator and the sample regression line
Measures of fit of the sample regression
Least squar
Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
Chapter4
9.
(a) With 1 0, 0 Y , and Yi 0 Y . ThusESS0andR20.
(b) IfR20,thenESS0,sothat Yi Y foralli.But Yi 0 1 Xi , sothat Yi Y forall
i,whichimpliesthat 0, orthatXiisconstantforalli.IfXiisconstantforalli,then
1
n
i 1
( Xi X ) 0 and 1 isundefined(seeequat
Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
Chapter 6 Linear Regression with Multiple Regressors
The two conditions for omitted variable bias
1. Z is a determinant of Y (i.e. Z is part of u); and
2. Z is correlated with the regressor X (i.e.
corr(Z,X) 0)
Both conditions must hold for the omission o
Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
Chapter 4 Linear Regression with One Regressor
Chapter 5 Regression with a Single Regressor: Hypothesis
Tests and Confidence Intervals
Heteroskedasticity and Homoskedasticity, and HomoskedasticityOnly Standard Errors
If var(uX=x) is constant that is, if
Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
LAST MINUTE ECON 2123 NOTES
1. SIMPLE REGRESSION MODEL
To allow for such divergences between estimated and exact values of Y, we will write the model as Y = b1
+ b2X + u, where u is a disturbance term. Disturbance is statistical error how one observation
Western University (Ontario)  Also known as University of Western Ontario
ECON 2123

Spring 2014
WESTERN UNIVERSITY
G. Stirling ECONOMICS 2123B Apr, 2016
Sample final questions
1. Suppose from a regression on 74 observations of a dependent variable on a constant and one
independent variable the RSS = 8.916
If the sample is divided into the first 40 o