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. Only use this tag for questions relating to the theoretical aspect of an econometric technique.

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Beginner's Guide to Econometrics [duplicate]

I was wondering if you could guide me to a book that I can use as a starting point for preparing myself for graduate level econometrics. I will be applying for MA programs this fall and wanted a head ...
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How to classify sample by time-variant index?

In finance paper, we have a famous index representing for law is WGI (World Governance Index). I am wondering how we classify countries by this index as this paper below. It is easy to classify based ...
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Why standard errors in country-level variables are higher than that in firm-level variables?

From this dicussion, the commentor said Lastly, firm fixed effects may absorb more variation and likely reduced the size of their standard errors. In practice, I also mainly see that the standard ...
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Why we need at least 40 group to be properly clustered?

From this discussion, I understand that we need at least 40 groups for clustering. For example, if we want to cluster by industry, we need at least 40 industries, or if we want to cluster by year, we ...
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How to explain the meaning of coefficients standing for ATT by words in DID setting?

In a generalized DID setting, we have the equation (I copy from a hot discussion that triggered my interest) $Margin_{ikjt}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$X_{ikt}$ + $\theta$$_{...
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What are the main differences among xtreg, areg, reghdfe?

Normally, when I run regressions for panel data in Stata using these three commands (xtreg,areg, ...
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2answers
87 views

What does “Difference-in-Diffrence” models with heterogeneous effects" mean?

Today, when reading this paper, page 3, I saw a sentence By decomposing the DD estimator into its sources of variation (the 2x2 DD’s) and providing an explicit interpretation of the weights in terms ...
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1answer
40 views

When we should use $R^2$ instead of adjusted $R^2$?

Following this topic, adjusted $R^2$ has been widely used to validate the trustable explanation adding of the additional independent variables. I am wondering when we should use $R^2$ instead of ...
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1answer
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Why excluding intercept is dangerous if there is no literature back up in DID setting?

Recently, I run the regression for the generalised DID following this paper: $Y_{it}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$X_{ikt}$ + $\theta$$_t$ + $\gamma$$_i$ +$\epsilon$$_{it}$ (1)...
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What is the “dummy variable trap”?

I saw an interesting Economics post yesterday with the long comment. I post the regression result of the OP here I saw @chan1142 stated that Thanks. I see the _cons row. That's the intercept; the ...
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A revisit to simple DID and Generalised DID

After a couple of questions being asked, I am curious about the inclusion of Post and Treat variable in a simple DID (two groups two-time period). We mainly know there are mainly two types of DID ...
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1answer
81 views

What are the meanings of “difference-in-differences” and “causal estimand”?

In one discussion, I saw the answer containing two words that I think can be used interchangeably, but I am not sure if it's the case. I simply state in other posts that the "generalized" **...
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1answer
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What does "dependent and independent variables only vary at the ($g,t$) level mean?

From de Chaisemartin and D'Haultfoeuille 2020, p.2969 I saw an equation $D_{g,t}$ $=$ $\alpha$ + $\gamma_g$ + $\delta_t$ + $\epsilon_{g,t}$ $D_{g,t}$ is the treatment in group $g$ at period $t$ They ...
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What is the difference between ATE and ATT?

I saw ATE and ATT in some discussions regarding DID settings recently. ATE is the Average Treatment Effect while ATT is Average Treatment Effects on Treated. I am wondering the difference between ...
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1answer
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Why we need to add firm and year relating independent variables in two-way fixed effect model?

From what I know, these terms are very basic in econometrics but I still not yet fully got it. To me, year fixed effect is to control time-variant omitted variables and firm fixed effect is to control ...
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What shoud we do when the expected treatment overlaps control sample in DID?

In a generalized Difference-in-Differences in Dasgupta,2019 paper, he documented that control countries did not have a leniency law introduced over 2 years before to 5 years after the introduction of ...
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can i treat panel data as pooled data?

I'm working with panel data on Stata. However, I want to perform the ROC analysis and for what I know it is way simpler using the "logit" command instead of "xtlogit". Thus, my ...
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Asking for the exception of unparallel trend in DID testing

When reading this paper, The Common Trends Assuption section, p.457, I saw a paragraph: Researchers, however, must also think carefully about the conceptual reasons for which the common trends ...
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How to clarify the description of common trend assumption?

From reading a paper, I saw the way they describe the common trend is Specifically, DID designs assume that confounders varying across the groups are time invariant, and time-varying confounders are ...
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A doubt on summary statistic of post*treat variable of a paper using DID (Dong,2019)

Generalized DID or Staggered DID are DID using staggered treatment events. In Dong,2019's paper, he uses the framework as below: $Margin_{ikjt}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$...
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1answer
65 views

MA Representation of an AR Process - Plain English

Just wanted to ask a qualitative question in terms of the AR(1) having an infinite MA representation. Firstly, here, in reverse order: I can understand why it is important to ensure that an MA process ...
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Advice on research methodology

I had wanted to ask this community for some advice on some potential methodologies I am developing. Context: I want to evaluate the effectiveness of a component of this scholarship program, which ...
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1answer
85 views

Is clustered standard errors the best way for all regressions that uses clustered data?

Using clustered standard errors assumes that the regression coefficients are the same for all the clusters in the data, right? What if they are not the same. For example, I have used F-test to compare ...
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1answer
168 views

What defines a data generating process

Let’s say we have a certain DGP $y=c+ax+bz+ error$. I take this to mean that conditional on the values of $x$ and $z$ in a certain instance (and no additional information )the expected value of $y$ ...
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Which statstical method/model should I use with my study?

my dear fellows. I mainly do experimental research, so I run experiments in which participants play a game repeatedly (for 20 periods for example). The dataset I get after the experiments would be ...
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2answers
60 views

Difference-inDifference model with Discontinued Treatment

I have a situation where I observe two groups A and B for three years. Group A never received any treatment. Whereas group B received treatment in year 2 only. I can estimate the impact of the ...
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1answer
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K-step ahead forecast of VAR(2)

I am trying to determine how to write the K-step ahead forecast of a VAR(2), with two variables, as a weighted average of its mean and last observations. I understand that one must use companion form, ...
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1answer
61 views

Data analysis with GARCH modeling

I'm currently analyzing the relationship between stock, bonds, and real estate returns in Germany. I've gathered my data and am planning on estimating this equation: $\sigma_t = \beta_0 + \beta_1 R_{...
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1answer
36 views

Walk through for calculating impulse response function, given VAR equation & coefficients

Can someone walk me through how to manually calculate the IRF values that Eviews outputs for the effect of a nonfactorized one unit innovation. I have my VAR equation and coefficients: ...
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1answer
29 views

Which values to assign to a quantified dummy variable

I am working on a data set from kaggle (https://www.kaggle.com/spscientist/students-performance-in-exams) about how student performance relates to some explanatory variables, such as if the school ...
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1answer
53 views

Difference-in-Differences setup for policy evalution

I have a panel data set of housing prices from different neighborhoods in a city - and wish to test whether or not a policy has had an impact on the housing prices. The policy (treatment) is simply a ...
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1answer
19 views

How to obtain real money balances data

Theoretically real money balances ($m_t$) are defined as: $m_t=\frac{M_t}{P_t}$ Where $M_t$ are nominal money balances, and $P_t$ is the price index of the economy. If I were to make an empirical ...
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IRF vs Autocorrelation function of AR(2)

Will the impulse response function and autocorrelation function of an AR(2) coincide? I say that they will not, because $IRF_{t}(t+k)$ (that is, the effect of a unit shock at time $t$, on the process ...
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Best method for extracting cycle component of time series

I have macroeconomic time series data, including both quantity and proportion variables (i.e. aggregate consumption, unemployment rate, etc.). I want to work with the rawest version of the data, ...
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1answer
79 views

Omited Variable Bias and descriptive statements

Let's say $y=c+ax+by+error$ (where the error term fulfills all the assumptions) descibes reality. If we have $z=vx$ than $y=h+max+s$ will also describe reality. When reading about OVB I have seen ...
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1answer
65 views

Interpretation of coefficients in a regression with a lagged dependent variable

I have estimated the following dynamic panel data model using GMM:           $\ln Y_{it}=\beta_0+\beta_1\ln Y_{it-1}+\beta_2\ln X_{it-1}+\epsilon_{it} $ where $Y$ is employment and $X$ is productivity....
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2answers
189 views

How to justify the treatment and control groups for Difference-In-Difference with staggered implementation of laws?

A. Background: Dong, 2019 and Dasgupta, 2019 used the same way to generate the treatment and control groups because they all learn about the impact of the same laws on different dependent variables. I ...
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1answer
48 views

Asymptotic variance vs. conditional variance in calculating regression estimator standard errors

I am given regression model $y_i=x_i^T\beta+\varepsilon_i$ with heteroscedasticity. Let $Avar(b)=E[x_ix_i^T]^{-1}E[\varepsilon_i^2x_ix_i^T]E[x_ix_i^T]^{-1}$ Hayashi's book states that regression ...
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37 views

Multinominal logit regressions - marginal effects

I am running a multinominal logit regression with five dependent variable categories: "I disagree fully", "I disagree", "Neutral", "I agree" and "I agree ...
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Event Study - Definition of Estimation Window (Trading Days vs Non-Trading Days)

I am currently conducting a event study for my research project on M&A. I have all data available and want to use https://www.eventstudytools.com/. But there is one clear which is not apparent to ...
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2answers
83 views

K-step ahead forecast for an AR(2)

Given an AR(2) process $y_{t}=\phi_{1}y_{t-1}+\phi_2 y_{t-2}$, I understand that the two-step ahead forecast (that is, $\mathbb{E}[y_{t+2}|y_t]$ is given by $(\phi_{1}^2+\phi_{2})y_{t}+\phi_{1}\phi_{2}...
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47 views

Choosing a econometric model for this situation

I want to estimate the effect of adoption of a policy (POL1) by firms on their Value (Y). The adoption of POL1 is driven by self-selection. A new law forces a subgroup of firms to adopt a policy ...
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1answer
55 views

A Special Case of Difference-in-Differences

I remember reading a paper where the Difference-in-Differences was a bit special, but I had forgotten the details. My recollection was Two time periods, specifically one time period before treatment ...
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1answer
48 views

Is exogeneity guaranteed for a lottery-generated instrumental variable?

If using $z$ as an instrument for $x$, to study the effect $x$ has on $y$ and given that $z$ was indeed generated through a lottery, is it definite that exogeneity of $z$ will hold? I have looked at ...
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1answer
88 views

Quarterly regression, year-fixed effects

I am trying to inspect the heterogeneous effects of a USA-based shock on a panel of countries using quarterly panel data. My variables of interest are the USA-based shock (which has only temporal ...
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16 views

Question on the choice of boundary in the CUSUM test when we make some resampling

Question on the choice of boundary in the CUSUM test when we make some resampling We are considering to make a CUSUM test for some economical time series $𝑋=(𝑥_1,..,x_n)$. Suppose 𝑋 contains many ...
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1answer
4k views

Quarterly GDP growth terminology: YoY vs QoQ

Quarterly GDP growth can be calculated either in terms of YoY change or — in the case of seasonally adjusted data — in terms of QoQ change. (A third option would be to annualize the QoQ rate.) To ...
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3answers
190 views

Translog cost function [closed]

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 someone can provide a software demo to estimate the same ...
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1answer
37 views

How to handle the missing values' issue of newly listed stocks?

I am trying to test some asset pricing models on 10 portfolios for the period of 2010-2020. The problem is that three of these portfolios included stocks that are newly listed in 2017 and 2018, so I ...
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1answer
54 views

Annual Data and Heteroscedasticity (Engle's ARCH test)

GARCH models are often applied to financial time series (daily, weekly or monthly stock returns). What about lower frequency such as quarterly and annual time series? This could include macroeconomic ...

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