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Econometrics- Chapter 2 Questions with Solutions 2024
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Econometrics- Chapter 2 Questions with Solutions 2024
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Econometrics- Chapter 2 Questions withSolutions 2024
Regression analysis - ANS-the relationship between a variable called the explained, or
dependent variable, and one or more variables called independent or explanatory
variables.
Correlation - ANS-how two random variables are linearly related.
Spurious correlation - ANS-two variables are statistically correlated but they have
nothing (or very little) to do with one another.
Regression Analysis Objective - ANS-To estimate the mean of the dependent variable,
given the values of the independent variables.
Population Regression Line (PRL) - ANS-gives the average value of the dependent
variable corresponding to each value of the independent variable.
Betas - ANS-are called the "parameters" of the regression.
Error term - ANS-1. It may represent the influence of those variables that are not
explicitly included in the model.
2.It may reflect the randomness of human behavior.
3.The principle of Ockham's razor (that descriptions be kept as simple as possible until
proved inadequate) would suggest that we keep our models as simple as possible. 4.
It may represent errors in measurement.
Estimation of Parameters: OLS method - ANS-The parameter estimates chosen should
be the ones which minimize the sum of squared residuals.
Population Regression Line (PRL) - ANS-Is a line that passes through the conditional
means of Y
Betas (B_1 and B_2) - ANS-are called parameters, also known as the regression
coefficients.
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