Week 2 Flashcards
What are parameters?
The coefficients in an equation that determine the exact mathematical relation among the variable.
Parameter Estimation
The process of finding estimates of the numerical values of the parameters of an equation.
Regression Analysis
A statistical technique for estimating the parameters for an equation and testing for statistical significance.
Dependent Variable
A variable whose variation is to be explained.
Explanatory (independent) Variables
Variables that are thought to cause the dependent variable to take on different values.
Intercept Parameter (A) -
Gives the value of Y where the regression line crosses the Y-Axis.
Slope Parameter
Gives the change in Y associated with a one-unit change in X
Random Error Term
Unobservable term added to a regression model to capture the effects of all of the minor, unpredictable factors that affect Y but cannot reasonably be included as explanatory variables.
What is a regression line?
A line that shows the average or expected value of Y for each level of X
Time Series
A data set in which the data for the dependent and explanatory variables are collected over time for a single firm.
Cross-Sectional Data
A data set in which the data for the dependent and explanatory variables are collected from many different firms or industrials at a given point in time.
Scatter Diagram
A graph of the data points in a sample
What is Y = a + bx with hats over the Y, A, and B called?
Sample Regression Line.
What is the residual?
True value - predicted value in a regression. (Yi - Yi^)
What is the method of least squares?
minimizes the sum of the squared distances from each sample data point to the sample regression line.
What are Estimators?
Estimators are the formulas by which the estimates of parameters are computed.
What is statistical significance?
When there is sufficient evidence from the sample to indicate that the true value of the coefficient is not zero.
What is hypothesis testing?
A statistical technique for making a probabilistic statement about the true value of a parameter.
What are unbiased estimators?
The estimators a^ and b^ do not generally equal the true values of a and b.
What is the T Value Formula?
B^
___
S b^
How do you calculate S^?
It is the standard error of b^, and you calculate it by looking at the standard error column in the regression.
What are degrees of freedom?
The number of observations in the sample minus the number of parameters being estimated by the regression analysis.
What is the Level of Significance?
The probability of finding a parameter estimate to be statistically different from zero when, in fact, it is zero.
What is a type 1 error?
When a parameter estimate is found to be statistically-significant when it is not.
