Econ B s1

Question 1

Explain difference between probability and statistics?

Answer 1

Probability considers an underlying process with an uncertainty to calculate what happens next

Statistics observed something that has happened and tries to figure out what underlying process explains these observations

Question 2

What does econometrics do?

Answer 2

Applies statistical methods to the analysis of economic phenomena

Question 3

What is an estimator?

Answer 3

Machine that takes data as input and produces a single number as an output

Question 4

Explain why an estimator is a random variable?

Answer 4

data result of random sampling therefore are RVs. Since the estimator is a function of the data it is also an RV

Question 5

What are the two desirable properties of an estimator, and which is more important?

Answer 5

1) Unbiasedness (more important)

2) Small variance

Question 6

Why do we want a small variance for an estimator?

Answer 6

Out of all unbiased estimators, we want the most informative one tf smallest variance

Question 7

Why do we want the estimator to be unbiased?

Answer 7

Because if it was baised it would have a systematic error

Question 8

See

Answer 8

Page 3 para 1.5.2 notes on why unbiasedness is more important than small variance

Question 9

Explain the large sample property of an estimator?

Answer 9

Consistency - as sample size n tends to infinity, the random variable beta1 converges to the population values of beta1