Econometrics - Theory Flashcards
Root MSE in STATA stands for :
SER
Total MS =
TSS
Residual SS =
SSR
Model SS =
ESS
TSS = ___ + ____
ESS + SSR
When analyzing STATA what do you have to assume unless specified otherwise?
That all 3 Least Squares Assumptions hold
and homoskedastic errors
What is the range of R squared?
0 to 1
A stock with Beta > ____ is riskier
1
A stock with Beta < ______ is less risky than the market portfolio
1
An empirical analysis is externally valid if _________
the conclusions can be generalized to other populations and other settings
Are results/studies regarding health in the United States externally valid?
No, because very few people in the US have health insurance and therefore results from the US cannot be generalized for other settings
An empirical analysis is internally valid when statistical inference _________
about the causal effects is valid for the population
For internal validity why should estimators be unbiased and consistent?
Because if they are not unbiased and consistent, answers don’t provide systematically skew results, providing accurate estimations close to the population average and consistency implies that as sample sizes increase, consistent estimators become more accurate, ensuring reliability.
The reason why we need the Large outliers are unlikely assumption is to derive that the OLS estimator is ____________
asymptotically normally distributed
We cannot calculate the OLS estimator if _________
there is perfect multiple linearity between explanatory variables; so there cannot be perfect multicollinearity
The first OLS assumption is not an assumption but a ___________
REQUIREMENT
List the threats to internal validity
- omitted variables
- functional form misspecification
- measurement error
- sample selection
- simultaneous causality
All of the threats to internal validity lead to a violation of: ________
OLS assumption #1 ; which states that the error term is not related to explanatory variables
If there are important explanatory variables missing from the model then _______
our results are biased and inconsistent, and therefore internal validity is not ensured
If a regressor correlates with the error term then it is _______
endogenous
If we ommit an exogenous variable,
Because labour market experience has a non-linear relationship with wages, if we only use linear parameteres we will be dealing with what problem:
Functional form misspecification
What is Sample Selection Bias?
Sample selection bias occurs when the process of selecting data is related to the dependent variable beyond its relationship with the regressors, leading to correlation between regressors and the error term, affecting OLS estimators’ consistency.
Can you explain how Sample Selection Bias manifests?
It arises when the selection process affecting data availability is tied to the dependent variable. For instance, in the 1936 polling example, selecting phone numbers of car owners introduced bias because car owners with phones were more likely to support a specific political party.