Prediction in the Classical Regression Model教学文稿.ppt

* * * * * * * * * * * * * * * Applied Econometrics William Greene Department of Economics Stern School of Business Applied Econometrics 10. Prediction in the Classical Regression Model Forecasting Objective: Forecast Distinction: Ex post vs. Ex ante forecasting Ex post: RHS data are observed Ex ante: RHS data must be forecasted Prediction vs. model validation. Within sample prediction “Hold out sample” Prediction Intervals Given x0 predict y0. Two cases: Estimate E[y|x0] = ??x0; Predict y0 = ??x0 + ?0 Obvious predictor, b’x0 + estimate of ?0. Forecast ?0 as 0, but allow for variance. Alternative: When we predict y0 with b?x0, what is the forecast error? Est.y0 - y0 = b?x0 - ??x0 - ?0, so the variance of the forecast error is x0?Var[b - ?]x0 + ?2 How do we estimate this? Form a confidence interval. Two cases: If x0 is a vector of constants, the variance is just x0? Var[b] x0. Form confidence interval as usual. If x0 had to be estimated, then we use a random variable. What is the variance of the product? (Ouch!) One possibility: Use bootstrapping. Forecast Variance Variance of the forecast error is ?2 + x0’ Var[b]x0 = ?2 + ?2[x0’ (X’X)-1x0] If the model contains a constant term, this is In terms squares and cross products of deviations from means. Interpretation: Forecast variance is smallest in the middle of our “experience” and increases as we move outside it. Dummy Variable for One Observation A dummy variable that isolates a single observation. What does this do? Define d to be the dummy variable in question. Z = all other regressors. X = [Z,d] Multiple regression of y on X. We know that Xe = 0 where e = the column vector of residuals. That means de = 0, which says that ej = 0 for that particular residual. Fairly important result. Important to know. Oaxaca Decomposition Two groups, two regression models: (Two time peri