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Questions tagged [econometrics]

Econometrics is the application of statistical methods to economic data for various purposes such as of testing hypotheses, infering causal relationships and forecasting future trends.

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By Newey and West(1987) paper, how are the results useful for deciding whether a1=0.8 in an auto-regression?

Can you help me with this type of questions: In this model: $$ y_t = \mu + \alpha_1 y_{t-1} + \alpha_2 y_{t-2} + \epsilon_t $$ By Newey and West(1987) paper, how are the results useful for ...
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Calculating volatility forecast errors - how to obtain “actual volatility” for comparison?

I have to replicate Liu & Morley (2009) on Polish data. They compare different methods of forecasting volatility in terms of Mean Absolute Error and other metrics. They use Hang Seng Index. What ...
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2answers
46 views

Using the sample mean to test hypotheses

Suppose that we have some data-points $x_1, ..., x_n$ and want to test a model that specifies a stochastic process which supposedly generated the data points. For example, we might want to test the ...
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14 views

matching methods from multiple entities

Say I would like to investigate whether a particular product feature affects its sales. We would like to match products based on feature vs non-feature. But the sales also depends on the retailers who ...
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1answer
17 views

Can central bank interest rate hikes lead to a price gain in equities?

I ran an empirical analysis on recent interest rate changes of European central banks on Swiss equity prices and found statistically significant results. A 1 percentage point increase in interest ...
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18 views

What affects the percent of working women within the country

I am making a multidimensional regression model. The independent variables that I have chosen are : 1)GDP per capita 2)life expectancy 3)average birth per woman 4)female unemployment 5)feminine ...
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1answer
54 views

Confusion over homoskedacity assumption

In my introductory econometrics course, we have been discussing the GM-assumptions and homoskedasticity. Unfortunately, I have some confusions and interlinked questions, so I am wondering if somebody ...
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1answer
24 views

Fixed Effects Estimation and Inconsistency

Consider estimation of the following population regression function: $G{Y_{it}} = {\beta _0} + {\beta _1}IN{F_{it}} + {\beta _2}DE{M_i} + {\beta _3}POI{L_t} + {\varepsilon _{it}}$ Where: $GY_{it}$ = ...
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Deriving the translog production function

Ive been having difficulty deriving the translog production function defined as: $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know ...
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3answers
69 views

what is the interpretation of $\beta_{ij}$ in the translog production function?

The translog production function is defined as the following. $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know it is a ...
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27 views

Intuition: Are IV coefficients expected to be smaller or larger than OLS?

I am thinking about a comparison between a pure OLS estimate of a multiple variable regression of $y$ and a 2SLS one, which is run with an exogenous instrument $z$ for one of the regression variables $...
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8 views

Find Bloomberg data for FTSE100 and SX5P

I need to compute the relative quoted spread, the daily average of the 5 min RQS and the book depth of FTSE100 and SX5P from January 2008 to November 2018. Could someone explain me the steps I need ...
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23 views

Bias in an Autoregressive Model

In Stock and Watson 3E.Updated, they posit in chapter 14 that if we estimate an Autoregressive equation using an AR(1) $$ y_t = \beta_0 + \beta_1 y_{t-1} + \varepsilon_t $$ where in fact the true ...
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1answer
46 views

Advance Microeconomics [closed]

Show that u=a+bM-yM^2 represents a risk averter's utility function who is interested only in the mean and the variance of the state distribution of Income M. Can anybody send me the full solution. ...
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58 views

A Perfectly Elastic Problem

A regression is of linear form y = bo + b1x1 + e It denotes house prices (dependent) on square-feet (independent) which are graphed on Y and X axis' respectively. Marginal effects measure a slope's ...
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1answer
31 views

Validity condition for Instrumental Variables

My professor states the validity condition in the following way: $W$ (the matrix of instrumental variables) must be such that $ \text{plim} \, \frac{W'u}{N}=0$, where $u$ is the error term. ...
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1answer
52 views

Statistical Learning and Econometrics

The principal goal of Econometrics is to find causal effects between economic variables. But the growing technology level seems to show us that Big Data and Statistical Learning result in a tradeoff ...
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35 views

Profit maximization problem using linear regression (pooled OLS)

I'm currently on a university assignment where I'm stuck more or less in the middle. I have to answer the following problem: Suppose you are interested in estimating the production function for ...
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1answer
37 views

Plim of ols estimator

Suppose you are given 2 models. Model of 1 has $y$ as the dependent variable and $x$ as the independent. Model 2 has $w$ as the dependent variable and $x$ as the independent variable. Both models have ...
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1answer
35 views

Whats the rationale for using taylor series in economics?

I've been reading about the translog production function and know its really just a log-log production function approximated using a first order maclauren series. Why not just leave the function as ...
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1answer
23 views

Analyzing vast economic/financial data

I have data science projects coming up in a university course in the upcoming quarters, and I was interested in using financial/economic data since there is so much of it. Also, I do have a hobby for ...
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12 views

Expectation conditional on a sum of random variables

The setting is a simple OLS regression where the true model has regressor $x$ and error term $u$, but we can only measure $\bar{x}=x+v$ where $v$ is iid with mean 0. According to the textbook: $\...
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2answers
61 views

Does omitted variable bias 'contaminate' coefficients for regressors not correlated with the omitted variable?

Suppose we have a model that is: $$ y = X_1\beta_1 + X_2\beta_2 + X_3\beta_3 + \varepsilon $$ where $X_1$ is independent of $X_2$ and $X_3$ but $X_2$ and $X_3$ are correlated with each other. ...
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How do I measure effects over years in panel data with individuals?

I'm working with a longitudinal panel dataset that surveys the same few thousand individuals biennially and I have six years of this data. My dependent variable would be how much individuals spend on ...
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0answers
28 views

Asymptotic variance under heteroskedasticity

I want to find an expression for the asymptotic variance of the OLS estimator given that the errors are heteroskedastic. I have understood the derivation using CLT for the homoskedastic case. I.e., $...
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25 views

study methods for first year phd courses in econ

I'd really like some tips on how to master the material for first year phd econometrics (texts: hayashi chap 1 -3, - econometrics, casella and berger 5 - 8th chapter - statistical inference) apart ...
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0answers
22 views

Helping in understaing new Pesaran and Timmermann test (and R code validation)

I am currently working with Pesaran & Timmermann test version from year 2009. Since I could not find any R package that contains function to calculate it (...
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0answers
11 views

Turning points in a regression STATA

What is the Stata command for calculating a turning point in a regression and analyzing how the data is distributed on each side of the turning point?
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1answer
73 views

Calculating standard error

Consider a regression model on the form: $y_{i} = \alpha + \beta_{1}X_{i} + u_{i}$ (1) I am given $var(u_{i}|X_{i}) = 10$ and I know the OLS estimates for $\alpha$ and $\beta$ and using this I have ...
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1answer
44 views

Cholesky Decomposition in R package “vars”

I'd like to know if, when running a VAR model in R (package "vars"), the cholesky decomposition matrix is upper triangular (so I should order my variables from more endogenous to less endogenous), or ...
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0answers
9 views

Can A/B be a better variable than separate A, B in linear regression?

While learning Econometrics, I got curious to know whether A/B can make a better variable than separate A and ...
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1answer
71 views

Linear Regression Assumptions of Homoskedasticity

When I studied linear regression analysis, one of the assumptions taught was that of homoskedatiscity. I understood that homoskedasticity was required for significance testing on the coefficients. ...
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1answer
65 views

not following a step in a paper on rational expectations

Hi: I'm reading a paper by Broze and Szafarz titled "On Econometric Models with Rational Expectations and I don't follow a step in section 3.2 which discusses the method of undetermined coefficients. ...
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1answer
45 views

Augmented Gravity Model

I am currently using the gravity model for my dissertation on migration flows. Do gravity models need to be augmented by dummy variables only or can other explanatory variables (such as the ...
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1answer
67 views

Can there be a sample such that SRF and PRF do not intersect?

I am confused if it is possible for to randomly select a sample such that SRF and PRF do not intersect. I have thought of the concept of parallel lines, which allows for such a case but I am unsure if ...
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1answer
47 views

Translog cost function

Can anyone help to estimate total cost under Translog cost function. I have input output and input cost data. It would be highly appreciated if software demo to estimate the same is given.
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1answer
42 views

Running ols when dependent variable is correlation coefficient

I am new to this form. I am going to run an OLS regression with dependent variable as a correlation coefficient (between -1 and 1). I am aware that this dependent variable may be problematic in the ...
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0answers
72 views

How to interpret Mincer equation coefficients

Consider the Mincer model: $\log(y)=b_0 + b_1S + b_2E + b_3E^2+u$ where S is schooling, Y is salary (monthly) and E is experience. I want to verify the following statements: The return for 1 extra ...
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1answer
34 views

Help with undergrad econometric project

I am working on undergrad research in econometrics and am seeking some advice/help in terms of finding data sets and picking variables. I have an idea chosen for my topic, but I need to make a ...
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2answers
61 views

Examples of Covariance Stationary Time Series

I seem to be having trouble in comprehending what it means for a time series to be covariance stationary. Specifically, with the third condition that for any $t,h$ the $cov(x_t,x_{t+h})$ only depends ...
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1answer
46 views

What is an unconditional model for a time series variable?

If I am being asked to do an unconditional analysis of a time series variable, lets say GDP starting in 2000, what model am I supposed to estimate?
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1answer
69 views

Panel Data and Forecasting

I have balanced panel data for around 130 countries, over three years. I ran a fixed effects regression using 'country' as my panel variable, and adding dummies for 'year'. I want to forecast the ...
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0answers
15 views

Any examples of non-parallelism making Diff-in-Diff estimation biased?

The key assumption in a Differences in Differences design is that both the control and the treatment group have parallel tendencies, that is, they'd follow similar paths over time if there was no ...
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26 views

AR(p) with white noise error term — always covariance stationary?

Is it always true that an AR(p) process with a white noise error will be covariance stationary?
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1answer
97 views

Show that the dividend price ratio is a ARMA(p, q) process

Let the log dividend growth evolve according to $\Delta d_{t+1} = \epsilon_{d, t+1}$ where $\epsilon_{d, t+1}$ is just white noise. Let the log returns be $r_{t+1} = x_t + y_t + \epsilon_{r, t+1}$ ...
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0answers
11 views

Using capacity share instead of quantity market share in demand estimation (BLP)

If I were to use capacity share (as a proxy of quantity market share) in a demand estimation setup (such as BLP), are there ways to deal or interpret the measurement error? I would consider this ...
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1answer
75 views

What econometrics book or textbook should I use?

I'm doing my Master thesis in economics. I have only a very basic understanding of econometrics, and honestly, I hate it, the same things go for stats and probability etc. Now, at my school my ...
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2answers
140 views

When is self-selection a problem? Mincer equation

I need help understanding this selection bias problem. I am estimating a mincer equation for a final year project and I was told I need to worry about self-selection bias IN OCCUPATIONS. My lecturer ...
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1answer
57 views

Lucas Critique and RE: Did one arrive before the other?

Hi All: I have no formal background in economics but I've been teaching myself RE for the last 3 or so years when I get the chance. I know the history and parts of the literature pretty well but it's ...
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21 views

How are rotation matrices used in structural VAR identification through sign restrictions?

I saw this identification method is used in several working papers but to me it is impossible to understand how it works by simply reading them. I have searched many books and lecture notes in order ...