Lecture summary and notes Advanced Empirical Methods
24 views 1 purchase
Course
Advanced Empirical Methods (FEM11164)
Institution
Erasmus Universiteit Rotterdam (EUR)
Summary of all lectures including the notes the professors made, including modules 1, 2, and 3. The course is obliged in several masters (behavioural, strategy and health economics). There is no exam, so these notes should enable you to make the three assignments that capture your grade for the cou...
1. Ordered categorical variables
Examples & Model setup
Discrete variable models
Dependent variable is the categorical variable
Ordered categorical variables are in categories with clear order (not
continuous)
Examples:
- Risk preferences, self-confidence, self-assessed health
Generally:
Y = 1, 2, …, J
- You describe this data with tabulate.
- It is an underlying latent variable between minus infinity and plus
infinity, but we observe the categorical variable (different
thresholds)
- This can be visually shown like this:
,We can use the ordered logit and the ordered probit model for an ordered
categorical dependent variable. If we make a linear model for latent
continuous variable y*:
The categorical variable with the underlying latent variable:
We can choose for ordered probit or ordered logit model; the choice
depends on the error term:
- Ordered probit: u follows a std. normal distribution.
- Ordered logit: u follows a logistic distribution.
They are almost identical, not much difference.
The probability that y=j with an ordered logit model:
Pay attention to the minuses in the formula (they are correct because of
the thresholds)
The probability that y=j with an ordered probit model:
,Ordered logit model
Exponential of minus infinity is zero, so
Exponential of infinity is infinity. Infinity / infinity = 1, so
, Ordered probit model is done in the same matter as logit
Maximum Likelihood Estimation
We take the log likelihood because this simplifies the likelihood function.
Capital L over all the observations
Small 1 over 1 observation
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller vicvantrigt. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.60. You're not tied to anything after your purchase.
