Data

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Data Theo ry Unrestricted Model t-statistics Restricted Model (excludes independent variables with low t-stats) F-statistic

description

Unrestricted Model. Data. Theory. t-statistics. Restricted Model (excludes independent variables with low t-stats). F-statistic. Unrestricted Model. Data. Theory. Examine t-statistics. Restricted Model (excludes independent variables with t-stats below critical-t). - PowerPoint PPT Presentation

Transcript of Data

Page 1: Data

Data TheoryUnrestrictedModel

t-statistics

Restricted Model(excludes independent

variables with low t-stats)

F-statistic

Page 2: Data

Data TheoryUnrestrictedModel

Examine t-statistics

Restricted Model(excludes independentvariables with t-stats

below critical-t)

F-statistic

F<Fcritical => do not reject H0F>Fcritical => reject H0

Finished Model

lower the critical-t

Page 3: Data

Data TheoryUnrestrictedModel

Restricted Model(excludes independentvariables with t-stats

below critical-t)

F-statistic with H0: excluded variablesdo not belong in model

F<Fcritical => do not reject H0F>Fcritical => reject H0

Finished Model

lower the critical-t

Are t-statisticscorrect? Test for•multicollinearity•heteroskedasticity