《计量经济学导论》ch2.pptVIP

Chapter 2 ;Definition of the simple linear regression model;Interpretation of the simple linear regression model The simple linear regression model is rarely applicable in prac-tice but its discussion is useful for pedagogical reasons;Example: Soybean yield and fertilizer Example: A simple wage equation;When is there a causal interpretation? Conditional mean independence assumption Example: wage equation;Population regression function (PFR) The conditional mean independence assumption implies that This means that the average value of the dependent variable can be expressed as a linear function of the explanatory variable; ;In order to estimate the regression model one needs data A random sample of observations;Fit as good as possible a regression line through the data points:;What does ?as good as possible“ mean? Regression residuals Minimize sum of squared regression residuals Ordinary Least Squares (OLS) estimates;CEO Salary and return on equity Fitted regression Causal interpretation?; ;Wage and education Fitted regression Causal interpretation?;Voting outcomes and campaign expenditures (two parties) Fitted regression Causal interpretation?;Properties of OLS on any sample of data Fitted values and residuals Algebraic properties of OLS regression; ;Goodness-of-Fit Measures of Variation;Decomposition of total variation Goodness-of-fit measure (R-squared);CEO Salary and return on equity Voting outcomes and campaign expenditures Caution: A high R-squared does not necessarily mean that the regression has a causal interpretation!;Incorporating nonlinearities: Semi-logarithmic form Regression of log wages on years of eduction This changes the interpretation of the regression coefficient: ;Fitted regression;Incorporating nonlinearities: Log-logarithmic form CEO salary and firm sales This changes the interpretation of the regression coefficient:;CEO salary and firm sales: fitted regression For example: The log-log form postulates a constant elasticity model