# Shared Flashcard Set

## Details

Managerial Econ (WJU MBA 506) Test II
Elasticity, Econometrics, Regression Analysis. Taken from notes and https://mywebspace.wisc.edu/rlbrown3/web/library/regression_explained.pdf
19
Economics
03/31/2013

## Additional Economics Flashcards

Term
 F
Definition
 compares the entire function (model 1) with y=B0 (model 2), meaning it is testing the hypothesisIf 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
 SST
Definition
 (Total Sum of Squares) is the total deviations in the dependent variable.
Term
 SSE
Definition
 (Sum of Squared Error) is the amount of the SST that could be explained by the model.
Term
 R-square
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
 T-ratio
Definition
 The reliability of our estimate of the individual beta
Term
 y-hat
Definition
 an estimated value based on current data
Term
 when to accept the z
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
 Function form pitfall
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
 "Different variation"
Term
 Auto correlation pitfall
Definition
 An important variable is missing. Durbin Watson test.
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