Binary Choice Models Flashcards

1
Q

What are the 4 scales of measurement?

A
  • Nominal (Categorical)
  • Ordinal
  • Interval
  • Ratio
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2
Q

What is a nominal scale variable?

A
  • Values provide classification but not an indication of order
  • Numbers are only used to categorise objects
  • Mathematical operations are meaningless
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3
Q

What is an ordinal scale variable?

A
  • Values provide an indication of order
  • Cannot determine distances between the objects
  • Mathematical operations are meaningless
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4
Q

What is an interval scale variable?

A
  • Values provide an indication of order
  • Have an equal distance between scale points
  • Ratios are meaningless
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5
Q

What is a ratio scale variable?

A
  • Values provide indication of order
  • Have an equal distance between scale points
  • Zero represents an absence of the object
  • Mathematical operations are meaningful
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6
Q

What are the problems with the Linear Probability Model?

A
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7
Q

What is the log likelihood ratio index?

A
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8
Q

What is the Pseudo R-Squared?

A
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9
Q

How do we draw the graph to represent when y*=1 or 0 for a binary variable?

A
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10
Q

What is the condition for y=1?

A

Pr(y=1│x)=Pr(ε>-[α+βx]|x)

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11
Q

What is the variance of the error term in the probit model?

A

1

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12
Q

What is the variance of the error term in the logit model?

A

π2/6

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13
Q

How do the probit and logit models differ when normalised?

A

the logit model has a variance of √1.6

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14
Q

How do we normalise the logit and probit models?

A
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