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Statistical Inference
4.1. The distribution of OLS estimator
~ t(n-k)
4.2 Testing hypothesis about one of
the regression coefficients
4.2.1. Confidence interval
4.2.2. T-statistic and Student t distribution
4.2.1. Confidence interval
Under the CRM assumptions, we can easily construct a confidence
interval (CI) for the population parameter i. Confidence intervals are
also called interval estimates because they provide a range of likely
values for the population parameter, and not just a point estimate.
ˆi − i t(n-k)
t=
Se( ˆi ) k biến, i=1,k
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Testing against two-Sided alternative
Example : Determinants of college GPA (example 4.3, p129)
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Example 2: Determinants of college GPA
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A reminder on the language of
classical hypothesis testing
• When H0 is not rejected → “We fail to reject
H0 at the x% level”, do not say: “H0 is accepted
at the x% level”.
• Statistical significance vs economic
significance: The statistical significance is
determined by the size of the t-statistics
whereas the economic significance is related
to the size and sign of the estimators.
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Testing against one-Sided alternative
Testing against one-Sided alternative
Testing Hypotheses on the coefficients
j = 0
Two tail |t0|>t(n-k),α/2
j 0
Right tail t0 > t(n-k),α
j 0 j 0
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4.3 Testing of joint hypotheses
• 4.3.1 Testing hypotheses on two and more
coefficients
• 4.3.2 F-statistic and Fisher F distribution
4.3.1 Testing the Overall Significance of
the Sample Regression
For Yi = 1 + 2X2i + 3X3i + ........+ kXki + ui
⚫ To test the hypothesis
H0: 2 =3 =....= k= 0 (all slope coefficients are simultaneously zero)
(this is also a test of significance of R2)
H1: Not at all slope coefficients are simultaneously zero
Option 1: t-test
• If the t variable exceeds the critical t value at the designated level of
significance for given df, then you can reject the null hypothesis;
otherwise, you do not reject it
Option 2: F test
F always positive
R 2 (n − k ) overall significance
F= kiểm định all =0 (8.5.7)
(1 − R 2 )(k − 1)
(k = total number of parameters to be estimated including intercept)
If F > F critical = F,(k-1,n-k), reject H0, Otherwise you do not reject it 20
Example : Testing the Overall Significance of
the Sample Regression
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4.3.2 F-statistic and Fisher F distribution
4.4 Testing single restrictions involving multiple coefficients
a. Testing the Equality of Two Regression Coefficients
• Suppose in the multiple regression
Yi = β1 + β2X2i + β3X3i + β4X4i+ui
we want to test the hypotheses
H0: β3 = β4 or (β3 − β4) = 0
H1: β3 ≠ β4 or (β3 − β4) ≠ 0
that is, the two slope coefficients β3 and β4 are equal.
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a. Testing the Equality of Two Regression Coefficients
H0: β3=β4vs H1: β3≠ β4
Option 1: t-test (test directly)
• If the t variable exceeds the critical t value at the designated
level of significance for given df, then you can reject the null
hypothesis; otherwise, you do not reject it
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a. Testing the Equality of Two Regression Coefficients
ˆ
Var ( 4 ) =
. 2
x 2
3
=
2
x3 x4 − ( x3 x4 ) (1 − r3,4 ) x4
2 2 2 2 2
− r 2 2
(1 − r3,4
2
) 3 4
x 2
x 2
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Example- Eview output
• Model: wage = f(educ,exper, tenure )
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Example- Eview output
• Model: wage = f(educ,exper, tenure )
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Example- Eview output
• We have se( ˆ3 − ˆ 4 ) = 0.029635
→t = -4.958 t 0.025 ,522 = 2.
→Reject H0
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a. Testing the Equality of Two Regression Coefficients
Option 2: Transform the regression (consider the
following model)
. test exper=tenure
( 1) exper - tenure = 0
F( 1, 522) = 24.58
Prob > F = 0.0000
→ We reject the hypothesis that the two effects
are equal.
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b. Restricted Least Squares: Testing Linear Equality
Restrictions
34
b. Restricted Least Squares: Testing Linear Equality
Restrictions
35
b. Restricted Least Squares: Testing Linear Equality
Restrictions
The t-Test Approach
•The simplest procedure is to estimate Eq. (8.6.2) in the usual
manner
•A test of the hypothesis or restriction can be conducted by the
t test.
(8.6.4)
•If the t value computed exceeds the critical t value at the chosen
level of significance, we reject the hypothesis of constant returns
to scale;
•Otherwise we do not reject it. 36
b. Restricted Least Squares: Testing Linear Equality
Restrictions
restricted model
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Example
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Example
• General F Testing
• Model: wage = f(educ,exper, tenure )
H0: beta(exper)=0
beta = 0 => ko có ý nghĩa => drop ra khỏi mô hình
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Example
• Unrestricted model
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Example
• Restricted model
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Example
General F Testing
•In Exercise 7.19, you were asked to consider the following
demand function for chicken:
lnYt = β1 + β2 lnX2t + β3 lnX3t + β4 lnX4t + β5 ln X5t + ui (8.6.19)
Where Y = per capita consumption of chicken, lb
X2 = real disposable per capita income,$
X3 = real retail price of chicken per lb
X4 = real retail price of pork per lb
X5 = real retail price of beef per lb.
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Example
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Example
51
TABLE 4.4 c: Savings and Personal Disposable Income (billions of
dollars), United States, 1970–1995
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c. Testing for Structural or Parameter Stability of
Regression Models: The Chow Test
• RSSUR = RSS1 + RSS2 = (1785.032 + 10,005.22) = 11,790.252
• RSSR = RSS3 = 23248.3
= 10.69
• From the F tables, we find that for 2 and 22 df the 1 percent critical F
value is 5.72.
• Therefore, The Chow test therefore seems to support our earlier hunch
that the savings–income relation has undergone a structural change in
the United States over the period 1970–1995
54
c. Testing the Functional Form of Regression: Choosing
between Linear and Log–Linear Models
• We can use a test proposed by MacKinnon, White, and Davidson,
which for brevity we call the MWD test, to choose between the two
models
H0: The true model is linear
H1: The true model is Log–Linear
Step I: Estimate the linear model and obtain the estimated Y values. Call them Yf
Step II: Estimate the log–linear model and obtain the estimated lnY values; call lnf
Step III: Obtain Z1 = (lnY f − ln f ).
Step IV: Regress Y on X’s and Z1 obtained in Step III. Reject H0 if the coefficient of Z1
is statistically significant by the usual t test.
Step V: Obtain Z2 = (antilog of lnf − Y f ).
Step VI: Regress log of Y on the logs of X’s and Z2. Reject H1 if the coefficient of Z2 is
statistically significant by the usual t test.
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EXAMPLE 4.4 The Demand for Roses
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EXAMPLE4.4The Demand for Roses
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Assignments
• Problems 7.16, 7.17, 7.18, 7.19, 7.20 in p25-
240, Gujarati.
• Problems 3.1-3.3 in p. 105-106, Wooldridge.
• Computer exercises C3.1-C3.3 in p. 110-111,
Wooldridge.
• 2, 3, 4, p 159, 160 Wooldridge.
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The Log-Linear Model
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Semilog Models: Log–Lin and Lin–Log Models
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Semilog Models: Log–Lin and Lin–Log Models