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Study these flashcards

- North-carolina
- University of North Carolina - Greensboro
- Economics
- Economics 643
- Hull
- Econometrics Comp

Sarah R.

• 125

cards
What is the Linear Probability Model?

Dummy Variables as Dependent Var

What is a disadvantage of LPM?

Heteroskedasticity

What Aspect of OLS does heteroskedasticity have a negative effect on?

Standard Errors are inaccurate, but OLS is still unbiased & consistent

LPM:

inLF=.568-.262kidlt6+u

On average, one additional child under 6** decreases the probability **that a woman is in the labor force by .262, all else equal.

Which tests are invalid when heteroskedasticity is present?

Variance Formulas, T-test, F-test - this is because heteroskedasticity has an effect on standard errors

What must be known to conduct WLS?

You must know functional form of heteroskedasticity to transform the model in WLS

What aspects of OLS are unaffected by the presence of heteroskedasticity?

Is OLS still BLUE if there is heteroskedasticity?

What is Weighted Least Squares Estimation (WLS)?

WLS:

Suppose Var (Ui|Inci)=σ^{2}h(Xi/)

What is better about WLS as compared to OLSwhen there is Heteroskedasticity?

When would you weigh observations to deal with heteroskedasticity?

Exogenous sample selection

Endogenous sample selection

What happens if a sample selection is endogenous?

Endogenous Explanatory Variable

Solutions to endogeneity within model

3 Conditions IV must meet

Weak Instrument

Two Stage Least Squares (2SLS)

Reduced form to test for endogeneity

Simultaneity

What is key to getting parameter estimates in simultaneous equations?

Qs=α1P+β1Z1+u1

Qd=α2P+u2

Which equation is identified?

2 Conditions for Identification

To estimate Simultaneous equation using 2SLS, what must hold?

1st Stage of Estimating Simultaneous Equations with 2SLS

Example of Difference in Differences Estimator

What is the key assumption when doing DID with panel data?

What are the two error terms in 2-period panel data analysis?

ΔCrime=5.4+2.22ΔUnemployment

Interpretation of Unemployment?

Derive First Difference Equation

What is an aspect of OLS that changes when your sample size decreases?

Which assumption fails with a binary dependent variable

Fixed Effect Model

What other factors can you control for in fixed effects model?

Homoskedasticity assumption

What variables would you have to create for the alternate white test?

What regression would you run for the alternate white test?

What result from the white test tells if there is heteroskedasticity?

What is a consequence of heteroskedasticity?

What action should you take if there are outliers in your data?

What causes the difference in standard errors between OLS and 2SLS?

Reduced Form for Y

How would you use reduced form to estimate identified equations?

Why wouldn't we want to use multiple proxies for the same unmeasurable variable?

What must be true for the classical errors in variables assumption to hold?

What does Ai measure?

How do you derive the first differenced equation?

What is the zero conditional mean assumption in terms of DID?

Why does the linear probability model violate the homoskedasticity assumption?

Reading: Does Diversity Pay?

Why would you want to control for more factors in a DID model?

How would dropping observations affect the precision of your regression?

ceteris paribus

definition of simple regression model

What is the average value of U in the population of a LPM?

True or False: The average value of U does not depend on X

What does it mean for U to be mean independent of X?

Practice OLS derivation

Total sum of squares

Explained Sum of Squares

Sum of Squared Residuals

Formulas for R^{2}

Assumption MLR 1

Assumption MLR 2

Assumption MLR 3

Assumption MLR 4

Which assumptions must be true for OLS to be unbiased?

Overspecification

Omitted variable bias

MLR Assumption 5

Gauss Markov Assumptions

Sampling variances of OLS slope estimates

What does an efficient estimator mean?

Which MLR assumptions must hold for OLS to be BLUE?

How is an estimator unbiased?

Review examples of liner vs nonlinear estimators

Which MLR assumption proves unbiasedness?

MLR 6

Under what conditions will the Normality assumption not hold?

Whats a good way to correct for a function with a non-normal error term?

formula for t-stat

Formula for Confidence Interval

interpretation of confidence interval

T test formula for a single linear combination of the parameters

When to use an F test?

in which case can log not be used to transform variable?

Interpretation of Double logs is the same as....

When would you use a quadratic in your equation?

How can you find turning points with quadratic models/.

Interpretation of intercation terms

Over - controlling for factors

What can worsen when more regressors are added to the model?

What is the interpretation of a dummy variable for gender, where 1 is female?

How can a dummy variable be depicted graphically?

Interpretation of dummy variable with log dependent variable

The function Y=log(x) is defined only for what values of X?

What function is the inverse of the natural log?

What is a consequence of heteroskedasticity?

What is a consequence of heteroskedasticity?

Under what circumstances is MLR.6 no longer necessary for valid hypothesis testing?

Interpret the 95% confidence interval for the coefficient on log(sqrft).

Practice Proof of unbiasedness

Practice Variance Derivation

Effects of a weak instrument

Adjusted R^{2} cant be above what number?

Dummy= .11 B1

- interpret B1

Structural equation:y1“β0`β1y2`u1

Reduced form fory2:y2“π0`π1z1`π2z2`v2(a)

State the instrument relevance condition in terms ofπ1andπ2.

Example of reduced form equation

Meaning of reduced form equation

What is the instrument relevance condition?

Z score for 95% confidence interval

What regression would you run for the alternate white test?

Which equations do you subtract for DID?

Zero conditional mean in context of DID

When does MLR 6 (normality) not hold?

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