Econometrics

A Brief overview of the Classical creaseagear regression model. 2.1 What is a verso model. In general, a regression is concerned with describing and evaluating the aloneiance surrounded by a given in strung-out variable and a underage variable. It is an attempt to explain movemements in a dependent variable by reference to movements in independent variables. recording label for YNames for X Dependent variable separatist variables RegressandRegressor Effect variableCausal variables Explained variableExplanatory variables. 2.2 retroversion VS Correlation Correlation between two variables measures the degreee of linear standoff between them. This says nothing about which variable influences the other. There is but order for a linear relationship. In a turnabout, the X(multiple) and Y argon treated very differentl. Y is as contributeedto be random or stochastic, and to have a opportunity distri thoion. X variables argon assumed to be non-stochastic. 2.3 Simple Regression When we have a disassemble plot, the regression line is the line through the smudges in a way that the vertical maintain between the observations and the regression line is a minimum. It is denoted by y=a+Bx. Because not all points ly on the regression line, we inquire an error term to free for the differences.

Yt=a+Bxt+ut present the subscript t denotes for the observation numbers.This stand not be done by the so called eyeballing method, but should be performed by ordinary least squ ars, OLS. Two utility(a) estimation methods for determining coëfficients a and B be the method of mo ments and the method of maximum likelihood.! (discussed in CH 8). The OLS takes separately vertical distance from the point to the line, squares it and then minimises the total sum of the areas of squares. (least squares). The reason we take squares is because other the points below the line would be substracted from the points above. By taking squares we are guaranteed of the total...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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