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Questions tagged [regression]

In statistics, regression analysis is a statistical process for estimating the relationships among variables. It includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables (or '...

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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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Mixed data with fiscal and calendar year

I am performing time series analysis with yearly frequently. However I need to regress a data compiled by calendar year against another compiled by fiscal year. Is it possible to deal with this? If ...
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Estimating parameters for model of specialization derived from Hecksher-Ohlin model of trade

I'm doing a dissertation on patterns of specialization, empirically testing the H-O model. It's only Master's level, so I'm afraid it's a bit derivative and basic. The backbone is to estimate ...
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what can be used as a proxy for Stock of Human Capital in an Economy?

I am an undergraduate student of Economics, currently in my Second year. I am writing an article wherein I need to show that Quantity of Skilled Labour is an important determinant of FDI inflow. A ...
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Why does instrument exogeneity imply conditional mean zero?

In the following slide ECON4150 - Introductory Econometrics Lecture 16: Instrumental variables, Monique de Haan it says that "instrument exogeneity implies $E[u_i \mid Z_i]=0$" where instrument ...
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Dummy variable regressor OLS coefficient formula

Consider the standard linear regression model: $y_i = \alpha + \beta D_i + e_i$ where the coefficients are defined by linear projections and $D_i$ is a dummy variable. In the population, the ...
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Macroeconomic control variable in GARCH

I would like to model the effects of news coverage on stock returns using a GARCH model. News is given a sentiment score, which is included in the regression as a (daily) variable. However, I would ...
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41 views

When is an OLS parameter unchanged on a subsample?

There is a sample of $n$ observations, each element has a numeric $Y$ and $X$ characteristic. There is an OLS regression over the sample $$ Y = b_0 + b_1 X + \textbf{u}, $$ $\textbf{u}$ being the ...
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Regression on derived consumer preference

I have a data set with some demographics of consumers who bought a product that can be used to imply their preference (beta) using Cobb-Douglas (see comments of original question). I’d like to check ...
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25 views

Nickell Bias in Unbalanced Dynamic Panel Models with binary Dependent Variable

I seem to be unable to tell the forest from the trees in the available literature. Imagine I want to test the impact of an exogenous shock in a dynamic panel setting to a get an impulse response ...
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1answer
25 views

Is there any specific distribution that is recommended for modelling individual income?

I'm a statistician and my colleagues work with income data every now and then, but they usually apply some arbitrary cut-off and go with logistic regression. I know there's an infinite range of ...
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Lead term significant

I am trying to examine whether X(-1) explains Y but finally find coefficients for X(-1), X, X(+1), and even X(+2) are all significant. Can anyone gives me some suggestions on how to deal with this ...
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Does the linear probability model require the regressand to be zero/one-valued?

Typically, the dependent variable in a linear probability model (LPM) is a 0/1-valued binary variable. What if the dependent variable $y_i$ is still binary but take on general values $a$ and $b$ ...
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26 views

Subset of Data in a gravity model

In my last subject of studies I am analyzing trade costs in a gravity model, e.g. multilateral trade resistance and bilateral trade resistance terms. The gravity model assumes world trade. However, I ...
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38 views

How to find a new instrumental variable

I want to replicate the econometrics analysis from the paper by Autor, Dorn and Hanson (2013): The China Syndrome: Local Labor Market Effects of Import Competition in the United States http://...
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75 views

Confounding versus endogenous variables. What is their relative hierarchical position?

There are valuable resources on the lexicon of types of variables quickly accessible, such as here. However, some of these concepts appear side-by-side often enough to make them confusing. For ...
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27 views

Indicator variables over unequal periods?

I'm comparing the volatility of capital flows using a panel data regression. I would like to examine changes in volatility over different periods (e.g. before financial crisis, financial crisis, ...
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31 views

Multiple regression

How can I test in a multiple regression model whether a drop of 1% in $x_1$ will cause a larger effect than a 1% drop in $x_2$, given that I used the growth rates of my dependent and independent ...
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20 views

Conditional Expectation

Suppose $(x_i,y_i)$ are random draws from the population and $\alpha, \beta$ are scalars. Let $u_i$ be unobserved effects(residuals). Consider the model $y_i=\alpha+\beta x_i +u_i$. By Law of Iterated ...
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conditional mean and conditional median

In Wooldridge's book (Page 452), it says When linear absolute deviation (LAD) methods are applied alongside OLS, thre are often reasons to think a priori that OLS and LAD will not produce similar ...
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60 views

Controlling for interaction effects

In a recent paper, Edelman et al. examine (amongst other things) how discrimination on AirBnB varies with the characteristics of hosts. First, they conduct a field experiment which involves sending a ...
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26 views

Regression: Durbin-Watson Test

My preferred model has an 'inconclusive' result for the DW test. Is this a classified as a failing of one of the Guass-Markov conditions? or can it be assumed that there is no autocorrelation in the ...
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49 views

Constant Regressor in GLS

Consider the following regression model: $y_{i1}=\beta_1 +u_{i1}$ $y_{i2}=\beta_{21}+\beta_{22}x_i+u_{i2}$. If $E(x_i' u_{i1})\neq 0$ and $E(x_i' u_{i2})=0$, will we get consistent estimators ...
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32 views

Categorical variable as explanatory variable (right hand side)

In a linear probability model, or any sort of regression, one can use fixed effect estimation by simply adding in a STATA code i.something. This "something" can be either a village, a county or a ...
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Taking regression analysis class in the department of statistics: is it helpful?

I know regression analysis is the part of econometrics. I took econometrics in the past, but I want to study this subject more deeply because I am planning to go to graduate school. I heard from ...
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25 views

How to get the effect of one dummy variable against many others?

I have the following regression: wage = constant + (beta1)*michigan+ (beta2)*california+...+(beta49)florida+(beta50)education + u where michigan is equal to one if the person is from michigan and ...
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Econometrics - Simultaneous Equations and Perfect Inelasticity in the Context of Regression

Assume a certain market can be described by Demand Function: $$Q_{d, t} = \alpha_0 + \alpha_1 P_t + \mu_{1, t}$$ Supply Function: $$Q_{s, t} = \beta_0 P_t + \mu_{2, t}$$ The price in this market is ...
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109 views

Sample used in calculating the sample regression function

Does the OLS (ordinary least squares) method of regression consider only one sample value in calculating the sample regression function (SRF)? If not, then how is the SRF created when there is more ...
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Does endogeneity matter when neither independent variable nor error term are correlated with dependent variable?

if the double arrows show that X and the error term are correlated, but that neither variable affects Y, is endogeneity a problem in this scenario? Why or why not?
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79 views

Proving consistency of quantile regression estimators

I have asked the question on the statistic section on stack exchange, but no one was able to give me an answer. I think this is actually is a question that touches econometrics so I am going to ask it ...
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1answer
74 views

Regression - Testing for autocorrelation in the presence of heteroscedasticity

I have constructed a linear time series regression model and estimated the parameters by applying OLS. I now want to test wether the assumptions for proper large sample inference (asymptotic Gauß ...
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1answer
25 views

Ttest and heteroscedasticity problem in no intercept model

I was running a t test over two regression betas with the assumption of equal variance. I know that if the condition of homoscedasticity do not hold then there are chances to have type 2 error but ...
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394 views

In panel data application, when using Fama and MacBeth regression is preferable over the fixed or random effect model? thought

When discussing panel data, many econometric books, usually, focus just on fixed or random effect model as means of estimating regression for panel data. Despite this tendency I have seen many papers ...
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21 views

Multiple regression.

How do I plot a multiple regression graph? Shall it be a many dimensional plane(equals to number of explanatory variable)? Or will be the line for each beta, since the slope or beta is the partial ...
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189 views

Testing for Endogeneity

I apologize if this question is very basic. I have the following plain vanilla Instrumental Variable model. $Y=\alpha+X\beta+\varepsilon$ $X=\delta+Z\gamma+\eta$ $\varepsilon\perp\eta,\quad Z\perp\...
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419 views

Alternative to linear regression

I'm third year economics student and all econometrics we had so far and basically all empirical studies in economic subjects we had so far are linear regression. Is there any alternative, can anyone ...
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91 views

Equilibrium Price - OLS Regression

I have asked another question related to price elasticity, which pretty much left me with this problem: I want to analyze the factors influencing the price of a product. The underlying assumption is ...
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29 views

OLS coefficients change signs at some point in time

I am running an OLS in which the dependent variable is the sum of daily log returns on S&P 500 and as independent variables I use some variables which I believe "drive" the SPX returns. My data ...
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2answers
285 views

Including (demand) price elasticity in a price regression model

I am wondering how to include price elasticity (demand side) in a linear price regression model that is based on asuming price is the result of demand=supply. Constructing a price regression under ...
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2answers
54 views

Conditional independence and no correlation

I have a question regarding basic econometrics. Consider the model $$y_i=\alpha +\beta x_i +u_i$$ I understand that assumption 4 of the linear regression model states $$[1] \quad E(u|x)=0$$ ...
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Marital status determinants

I am looking for the researches that have studied factors influencing marital status probability. I need them for citation purposes. After looking for a long time I have not found anything. So I need ...
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252 views

Regression over the whole population

What's the meaning of the standard error of a coefficient in a regression when the whole population is included? I've been so puzzled by this question. Because it seems to me, standard errors make no ...
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2answers
146 views

Monthly average rate of discount, 3 month Treasury bills, Sterling Vs 1 Month

I have been advised by one of my professors to use UK treasury bills for a risk free rate when calculating expected returns for stocks. I wanted to know whether I should be using 1 month T-Bills or 3 ...
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1answer
75 views

Regression with Dummy Variables

When I analyzed a data set with two categories, I used a dummy variable $z=1$ for category 1, and 0 otherwise, and added the extra term $\beta z$ to the regression model. Suppose the least squares ...
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1answer
228 views

Independent identically distributed

When we are talking about the least squares assumptions, one of the assumpions is that (X,Y) are i.i.d. What bothers me is that if we take an example population and research distributions of age and ...
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1answer
381 views

price elasticity: Linear regression low r square

I faced an interview question for a job where interviewer asked me suppose your r square is very low (between 5 to 10%) for a price elasticity model. How would you solve this question? Anything that ...
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1answer
196 views

Fama Macbeth and double clustering presents inconsistent results

I have a large unbalanced panel data with 460 firms and 1259 days. The model I would like to run is below $$ Y_{it} = \beta X_{it} + \alpha Z_{t} + \epsilon_{it} $$ where $Y_{it}$ is stock return, ...
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78 views

RDD with multiple cutoffs

I am trying to study the effects of a policy on educational attainment of individuals (years of schooling, primary/secondary school completion, literacy). Since the policy starts in a specific year I ...
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109 views

Relationship Input Distance Function and Output Distance Function

I was wondering if anybody knows how input distance functions (IDF) and output distance functions (ODF) relate to each other. One of the advantages of distance functions over cost and revenue ...
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55 views

Positive interaction term with one negative component?

Say I have an augmented growth regression, where my Y is GDP growth, and my Xs are the classical MRW variables, + international aid + corruption + the interaction term between the two. Basically, I'm ...