econometrics lecture 2 Flashcards
1
Q
residuals =
A
difference between the actual and the fitted
(approximated) values of the dependent variable π
2
Q
total sum of squares (SST)
A
(Y1- Y hat )2
3
Q
explained sum of squares
(SSE),
A
( Y arrow - Y hat)2
4
Q
residual sum of squares (SSR)
A
E squared
5
Q
SST =
A
SSR + SSE
6
Q
R squared
A
SSE/SST OR 1-SSR/SST
7
Q
what value can R squared be and why?
A
between zero and 1 because SSE < SST
8
Q
If data points lay on the same line, what does R squared equal
A
1
9
Q
Homoskedasticity Condition
A
variance of the residual, or error term, in a regression model is constant.
10
Q
Exogeneity Condition
A
πΆππ£ (ππ
, π’π) = 0,
states that the instrument is uncorrelated with the error term (e). In other words, the instrument affects the outcome (Y) only through X.
11
Q
A
