CHAPTER 2: TWO-VARIABLE REGRESSION ANALYSIS: SOME prefatory IDEAS 2.1 It tells how the mean or average response of the sub-populations of Y varies with the immovable values of the explanatory variable (s). The distinction between the precedent turnabout function and the population regression function is important, for the actor is is an estimator of the latter; in most situations we have a sample of observations from a given population and we try to attain something about the population from the given sample. A regression set hatful never be a completely close description of reality. Therefore, there is bound to be some leaving between the actual values of the regressand and its values estimated from the chosen example. This contrariety is simply the stochastic error term, whose various forms are discussed in the chapter. The residual is the sample counterpart of the stochastic error term. Although we can certainly use the mean value, standard deviation and separate summary measures to describe the behavior the of the regressand, we are often implicated in finding out if there are each causal forces that affect the regressand. If so, we will be able to better(p) predict the mean value of the regressand.
Also, remember that econometric works are often developed to test one or more(prenominal) economic theories. A model that is elongated in the parameters; it whitethorn or may not be linear in the variables. Models (a), (b), (c) and (e) are linear (in the parameter) regression models. If we let ? = ln ? 1, then model (d) is also linear. (a) Taking the natural log, we find that ln Yi = ? 1 + ? 2 Xi + ui, which becomes a linear regression model. (b) The following transformation, cognize as the logit transformation, makes this model a linear regression model: ln [(1- Yi)/Yi] = ? 1 + ? 2 Xi + ui (c) A linear regression model (d) A nonlinear regression model (e) A nonlinear regression model, as ? 2 is raised to the ternary power. A model that can be made linear in the...If you want to get a full essay, ball club it on our website: Orderessay
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