Term

Definition
the variation in one variable is completely explained by movements in another explanatory variable 


Term
severe imperfect multicolinearity 

Definition
linear relationship between two or more independent variables that is so strong that it can significantly affect the estimation of the coefficients of variables. 


Term

Definition
a variable that is so highly correlated with the dependent variable that it completely masks the effects of all other independent variables in the equation. 


Term
consequences of multicolinearity 

Definition
(1) Estimates will remain un biased; (2) The variances and thus the standard errors of the estimates will increase; (3) The computed tscores will fall; (4) estimates become vary sensitive to changes in specification; (5) The overall fit of the eq. and estimation of the nonmulticolinear variables will be largely unaffected 


Term
variance inflation factor 

Definition
method of detecting the severity of multicolinearity by looking at the extent to which a given explanatory variable can be explained by all the other explanatory variables in the equation (higher = more severe VIF) 


Term

Definition
an explanatory variable that represents the same effect on y as another expl. variable 


Term

Definition
occurs when CA V is violated in a correctly specified equation. (CA V: the variance of the error term is constant) 


Term
impure heteroskedasticity 

Definition
heteroskedasticity caused by incorrect specification 


Term

Definition
The variance of the error term changes proportionally to the square of Z. The higher the Zi, the higher the variance for that observation. 


Term
The consequences of heteroskedasticity 

Definition
(1) pure heteroskedasticity does not cause bias in the coefficient estimates; (2)HS generally causes OLS to no longer the Best(minimum variance) estimator; (3)heteroskedasticity causes the OLS estimates of the SE(Bhat)'s to be biased, leading to unreliable Tscores and hypothesis testing 


Term

Definition
tests the residuals of an equation to see if there is heteroskedasticity in the error term of the equation 


Term

Definition
(1) Obtain the residuals of the estimated reg eq; (2) Use these residuals to form the dependent variable in a second regression; (3) test the significance of the coefficient of Z in the second regression with a ttest 


Term

Definition
another test for HS; to be used when Z is unknown 


Term

Definition
(1) Obtain the residual of the estimated regression equation; (2) Use these residuals to form the dependent variable in a second regression that includes each X from the original equation, the square of each X, and the the product of eac X times every other X; (3) Test the overall significance of that equation with the chisquare test 


Term
heteroskedasticitycorrected (HC) standard errors 

Definition
SE(Bhats) that have been calculated specifically to avoid the consequences of heteroskedasticity 


Term

Definition
linear in the coefficients equation used to explain a dummy variable. 


Term

Definition
average percentage of ones explained correctly, and the percentage of zeros explained correctly 


Term

Definition
estimation technique that avoids the unboundedness of the linear probability model by using a variant of the cumulative logistic function 


Term
interpretation of an estimated logit coefficient 

Definition
divide by 4, interpret as a linear probability coefficient 


Term

Definition
best way to tackle situation with more than one option, extension of the binomial logit model. n1 logit equations are used 


Term
Impure serial correlation 

Definition
occurs when CA IV is violated by way of an incorrectly specified equation. (CA IV: no correlation between error term observations) 


Term
firstorder serial correlation 

Definition
current value of the error term is a function of the previous value of the error term 


Term
first order autocorrelation coefficient 

Definition
measures the functional relationship between the value of an observation of the error term and the value of the previous observation of the error term 


Term
Durbin Watson Dstatistic 

Definition
used to determine if serial correlation exists in a given equation. No serial correlation exists if dw stat = 2, extreme negative correlation if D = 4, extrem positive correlation if D=0. 


Term
generalized least squares 

Definition
method of ridding an equation of pure first order serial correlation, and in the process restoring the minimum variance principal to the estimation 


Term
positive serial correlation 

Definition
error term tends to have the same sign from one period to the next 


Term
NeweyWest standard errors 

Definition
SE(Bhat)'s that take into account without chaninging the betas 

