1.) An Overview of Regression Analysis

Question 1

β0

Answer 1

is the constant or intercept term; it indicates the value of Y when x equals 0

Question 2

β1

Answer 2

is the slope coefficient; and it indicates the amount that Y will change when X increases by one unit

Question 3

an equation is linear if …

Answer 3

plotting the function in terms of X and Y generates a straight line

Question 4

A stochastic error term is a term that is added to a regression to…

Answer 4

introduce all of the variation in Y that cannot be explained by the included X’s

Question 5

Unexplained variation probably comes from…

Answer 5

sources such as omitted influences, measurement error, incorrect functional form, or purely random and totally unpredictable occurrences

Question 6

By random the textbook authors mean…

Answer 6

something that has its value determined solely by chance.

Question 7

Four possible sources of variation that require stochastic error term

Answer 7

1. ) Many minor influences on Y are omitted form the equation
2. ) It is virtually impossible to avoid some sort of measurement error in the dependent variable
3. ) The underlying theoretical equation might have a different functional for (or shape) than the one chosen for the regression.
4. ) Al attempts to generalize human behavior must contain at least some amount of unpredictable or purely random variation.

Question 8

What is the deterministic component of the regression expression?

Answer 8

B0 + B1*X

Question 9

What changes from observation to observation?

Answer 9

The coefficients do not change from observation to observation, but the values of Y,X, and e do.

Question 10

Multivariate regression coefficients…

Answer 10

serve to isolate the impact on Y of a change in one variable from the impact on Y of changes in the other variables

Question 11

The ability of regression analysis to measure the impact of one variable on the dependent variable, holding…

Answer 11

constant the influence of the other variables in the equation, is a tremendous advantage.

Question 12

when is a dummy variably useful?

Answer 12

when we want to quantify a concept that is inherently qualitative (like gender)

Question 13

The estimated regression coefficients are..

Answer 13

empirical best guesses of the true regression coefficients and are obtained from data from a sample of Ys and Xs

Question 14

Estimated coefficients are used..

Answer 14

to determine Y hats, the estimated or fitted value of Y

Question 15

“Y hat i “is…

Answer 15

the estimated value of an observed Y, and it represents the value of Y calculated form the estimated regression equation for the ith observation.

Question 16

What is the residual?

Answer 16

It is the difference between the estimated value of the dependent variable and the actual value of the dependent variable

Question 17

The smaller the residuals…

Answer 17

the better the fit, and the closer estimated Ys will be to the observed Ys.

Question 18

The difference between an observed data point and the ture line is the …

Answer 18

value of the stochastic error term

Question 19

Cross Sectional Data

Answer 19

all of the observations are form the same point in time and represent different individual economic entities from that same point in time