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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9 views

Incidental Parameters Problem in Poisson Regression

I have been told that Poisson Regressions do not suffer from the incidental parameters problem that most MLE suffers. I am attempting to prove this, and have not been able to finish. The derivation I ...
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How to calculate price of intermediate product? [closed]

If a firm is divided into a marketing division, involved in the production of a final product which uses an intermediate product produced by a production division. The demand function for the final ...
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How to explain the significant levels change when adding interaction variables?

@1muflon1 has a great explanation regarding the interaction variable meanings when I want to compare the laws' effect on firms' asset growth between developed and developing countries. Today, when ...
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Error structure in subsampling

Subsampling is normally examined in many international studies (grouped by market developement, country governance,etc), @1muflon1 has a great explanation here in one case. In his answer, there is one ...
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Difference between AR confidence intervals reported in weakiv versus twostepweakiv

Should the Anderson-Rubin confidence intervals reported in weakiv and twostepweakiv be equal to each other? Sun (2018) does not ...
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What is social science and discussion about Type II error preference?

Today, my senior lecturer in economics and finance class teaching about laws impact companies' operation told us one sentence "Also keep in mind that in (at least social) science, we care (try to ...
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Type I and Type II errors examples to clarify the definition in economics and finance [duplicate]

Type I and Type II errors' definition following this link is as below A Type I error means rejecting the null hypothesis when it’s actually true. It means concluding that results are statistically ...
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Deriving the VECM form of a VAR(1) model [closed]

Above is a question regarding volatility models and specifically deriving the VECM form from a VAR(1) model, unfortunately my lecturer hasn't provided an example of such a question prior so would love ...
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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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Subsampling result explanation?

I want to examine whether the impact of laws on asset growth difference between developed and developing countries. One way to do so is by adding the interaction between the variable of interest and a ...
56 views

What are the dynamic and static event-study?

When reading about the Difference-in-Differences for multiple groups and time periods, I see a term called "static or dynamic/event-study". Can you help me to distinguish these two settings ...
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Show that the estimator of GMM weigh matrix is consistent

(Hansen Exercise 13.3) Take the model $Y = X'\beta + e$ with $\mathbb{E}[Ze] = 0$. Let $\tilde e_i = Y_i - X_i'\tilde \beta$ where $\tilde\beta$ is consistent for $\beta$ (e.g. a GMM estimator with ...
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Sample size and statistical significance dicussion

As we know, sample size can play a role in reaching statistical significance, provided that splitting the quant world in what is and what is not statistically significant is probably an overestimated/...
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Do I have to bootstrap the dummy variables used for event dates in an event study?

I am doing a project where i am trying to estimate the effect of the inclusion of a stock in an ETF on its returns, meaning that i am trying to see how the inclusion of a stock in a given ETF affects ...
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AR(q) Strongly Stationary

Consider an AR(q) process, $u_t$. If the roots of a characteristic polynomial are outside of the unit circle, the AR(q) process is weakly stationary. I've seen this proof that proceeds by showing the ...
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From this discussion, one way of conducting the subsample test is changing the equation from Dependent_variables= pt + Independent_variables + fixed effects + error term to Dependent_variables= pt + ...
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Revisiting whether we can control for three dimensions or not?

We have a great discussion here about controlling for three dimensions (firm, year, and industry fixed effects) A reasonable way to do so so far is controlling for firms fixed effect and industry * ...
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Multi Linear Regression [closed]

I have conducted a multi-linear regression for a data set as part of my econometrics course. The equation is as below - Log(output) = b1 + b2fwage + b3educ + b4fwage.educ + b4exper + b5exper2 + ...
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How clustering affects standard error?

In panel data, when adding covariates, the standard error normally decreased, I am wondering whether standard error when clustering higher or lower comparing to without clustering.
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A better way of expressing income distribution that takes into account the inequality?

I apologize if it is too trivial a question, but I didn't seem to find quick answer and haven't encountered it in my math classes back in high school loads of years ago. When talking about people's ...
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What does “unit level” mean?

From a discussion here, I saw a comment that Clustered standard errors/variances with clustering at the unit level are equivalent to robust standard errors/variances. If I am examine at firm level, ...
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Have you ever seen any paper controlling for firm, industry, and year fixed effect at the same time?

In this discussion, @1muflon1 has a comprehensive answer about some commonly-used fixed effects. I am wondering how to do industry and year fixed effect but still having firm fixed effect? If we do ...
131 views

Seemingly Unrelated Regression Estimation - Equivalent to OLS Standard errors?

In a SURE framework, if all X are the same in all regressions I was under the impression that there is no efficiency gain. Recently an assistant professor told me that the beta coefficients would be ...
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How can I control for trade between UK and Australia in my difference-in-difference trade model?

I am doing a report on whether environmental regulation has an impact on trade, using a difference-in-difference model and seeing whether the EU Industrial Emissions Directive had an effect on UK ...
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Why including individual level variables help to control for confounding events?

In Pischke,2005, p.7's note, he documented Including individual level variables may not only help to control for confouning trends, but may also reduce the variance of $\epsilon_{ist}$ , which may ...
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Can Difference-in-Difference be used when the treatment effects get smaller with time since treatment?

Recently, there is an emerging line of the study said that the traditional two-way fixed effect(TWFE) is failed in a lot of case because of the heterogeneous effects of laws over time, follow some ...
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Bootstrap always valid under asymptotic Normality?

If an estimator is known to have an asymptotically normal distribution, is that sufficient for the bootstrap to be valid? It seems that is must be, but in 20 minutes of Googling I have come up empty ...
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Randomisation and balance in experiments

Suppose we are interested in the effect of some 'treatment' on some outcome of interest. A common practice is to select a group of people and then randomly choose some fraction (often half) to receive ...
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Get empirical steady state moments for calibrating a DSGE model

I want to calibrate some parameters of my DSGE model so that in the steady state some variable ratios, that are present in data, are met. My question is, how do I get such ratios from time series ...
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Why are simple returns additive over securities?

I've found a few sources for instance this one, that makes the claim that over a portfolio, simple returns are additive. I can see why it doesn't make a difference if we use net or gross returns as ...
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Reverse DiD: or using always treated as control

I would be interested also in the generalised case, but let's start with 2x2 to keep it simple. Say you have two groups $i \in \{1,2\}$ and two time periods $t$ and $t-1$, as the classical DiD case. ...
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Precision of language regarding “statistical significance” in Wooldridge's *Introductory Econometrics* (7th ed)

I've been reading Jeffrey Wooldridge's textbook Introductory Econometrics: A Modern Approach (7th edition) in preparation for a class I will be teaching. I've appreciated the precise language he uses, ...
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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 ...