Term

Definition
compares the entire function (model 1) with y=B0 (model 2), meaning it is testing the hypothesis If the F is not significant, then we cannot say that either model 1 is any better than model 2. It is obtained by dividing the explained variance by the unexplained variance. 


Term

Definition
(Total Sum of Squares) is the total deviations in the dependent variable. 


Term

Definition
(Sum of Squared Error) is the amount of the SST that could be explained by the model. 


Term

Definition
is the ratio SSR/SST (wrong equation?). It captures the percent of deviation from the mean in the dependent variable that could be explained by the model. Aka coefficient of determination. 


Term

Definition
measures the proportion of the variance in the dependent variable that was explained by variations in the independent variables. Adjusted by the number of observations. 


Term
Std error of the estimate 

Definition
measures the dispersion of the dependent variables estimate around its mean. Compare this to the mean of the â€œPredicted" values of the dependent variable. If the Std. Error is more than 10% of the mean, it is high. 


Term

Definition
The reliability of our estimate of the individual beta 


Term

Definition
an estimated value based on current data 


Term

Definition
when the z value is greater than 2, accept it 


Term
major pitfalls in regression analysis 

Definition
1. Function form. 2. Association versus causation. 3. Measurement error. 4. Identification problem. 5. Simultaneous equations. 6. Multicollinearity. 7. Heteroscedasticity. 8. Auto correlation. 


Term
Assumptions of a regression 

Definition
ceteris paribus, reliable data, no pitfalls. 


Term

Definition
Assumes a linear relationship, such as law of diminishing return. Can be fixed by trying to square or combine variables. 


Term
Association versus causation pitfall 

Definition
Be careful to assume causation. 


Term
Measurement error pitfall 

Definition
Not measuring what you say you are measuring. 


Term
Identification problem pitfall 

Definition
Can measure supply or demand but NOT both 


Term
Simultaneous equations pitfall 

Definition
DVs show up as IVs. E.g. Edu is a function of income is a function of edu 


Term
Multicollinearity pitfall 

Definition
secondary variables are related. Test IVs by running regressions between them. 


Term
Heteroscedasticity pitfall 

Definition


Term

Definition
An important variable is missing. Durbin Watson test. 

