Questions tagged [variance]
The variance tag has no usage guidance.
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Do market volatility and optimal trade confirmation strength correlate?
In this video, it is suggested that in high volatility markets, trading algorithms which wait for more confirmation to buy perform better than trading algorithms which buy more quickly, while in low ...
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Simultaneous Causality and Variance within a supply and demand model
Given two single-variable regression equations, one for Demand and one for Supply, both with error terms and a constant. How does one solve for equilibrium quantity, price? Obviously you can set ...
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Back-testing for FX VaR model
Suppose that a company for modeling market risk arising from Foreign Exchange positions in its portfolio decides to use the VaR model to compute the minimal amount of capital to hold. Assume that the ...
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Independent variables that don't vary much but are essential for the theoretical framework, what to do?
I'm working on finding out the impact of Covid.19 on commuting so income and distance will be relevant variables to include. However, these variables dont change from period to period, so it's ...
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Measurement Error - Multivariate Case
I have a linear regression model, with usual assumptions holding; $E[xu] = 0$ and rank condition.
$y_i = \alpha_0 + \alpha_1x_{1i} + \alpha_2x_{2i} + u_i$
I observe $\bar{x}_{2i}$, where:
$\bar{x}...
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Clustering Degrees of Freedom Correction
In a regression model estimated with $n$ observations,
$$y_i = \beta_0 +\beta_1 x_{1i}+...+\beta_k x_{ki} +u_i$$
the baseline degrees of freedom adjustment when calculating standard errors is to ...
- 3,366
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WLS or Feasible GLS?
For a question like this, would I use WLS or Feasible GLS? I am leaning towards WLS but my lecture slides tell me GLS is used when there is more than one variable that drives the residual variance.
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Derivation of autocovariances Lewis (2021) RES
I am studying this paper, and I don't understand the derivation of the covariances at the bottom of page 3090.
Basically I have two shocks: $\varepsilon_{1t}$ has constant volatility $E[\varepsilon_{...
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Comparing degree of dispersion without calculating variance
There are two (price) distributions of the same class, but they differ in parameter values. One distribution has a smaller upper bound and a greater lower bound, so intuitively we know it has a ...
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Arch Model and $\sigma$
In my problem set about ARCH models I'm given that
$\epsilon^2_{t}=\alpha\epsilon^2_{t-1}+v_{t}$
But then I'm asked to calculate
$E(\sigma^2_{t+n}|I_{t-1})$.
So is the same to calculate $E(\epsilon^2_{...
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variance of error term(econometrics)
I don't understand that the pointed part(with a red circle) is a negative sign. I expect it should be a positive sign since the whole parenthesis was squared. I don't know where I got wrong.
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how to adjust price data due to clock changes?
I'm trying to analyze the hourly price variation of the electricity market. However, because of clock changes, due to daylight saving time, we have a missing hour in March and an additional hour in ...
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Covariance between regression coefficient and residual
Given regression equation Y=Xβ + ε which satisfies all classical assumptions including those of homoscadasticity
Estimated regression equation using OLS is the following -
Y=Xb + e
Where, b is ...
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Why can we replace dependent variable y with the residuals e?
I don't understand why we can replace y with e:
Mainly, why can we simply replace y with e, given that y is defined as:
Thanks ...
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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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Sample weights in Stata: fweight vs. pweight
I'm working with IPUMS ACS and Census data in Stata. I'm interested in learning about income distributions and variability for specific subpopulations defined by education level, occupation, race and ...
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Variance of Quantile Regression
I have been looking at quantile regression (since it is a much better method when trying to quantify welfare effects), and I am struggling with the following, standard model:
$\textbf{Model:}$
$y=x'\...
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