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Athanassios Stavrakoudis
http://stavrakoudis.econ.uoi.gr
Spring 2014
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Contents
3 Goodness of Fit
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Matrix Algebra
Dirk Eddelbbttel:
Econometricians sweat
linear algebra.
Dirk Eddelbbttel, Econometrics with Octave,
J. Appl. Econ., 15: 531542 (2000), doi:10.1002/1099-
1255(200009/10)15:5<531::AID-JAE573>3.0.CO;2-8
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Creel Econometrics
a
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Creel Econometrics
b
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Creel Econometrics
c
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Creel Econometrics
d
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Contents
3 Goodness of Fit
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House prices
price sqft
199 ,9 1065
228 ,0 1254
235 ,0 1300
285 ,0 1577
239 ,0 1600
293 ,0 1750
285 ,0 1800
365 ,0 1870
295 ,0 1935
290 ,0 1948
385 ,0 2254
505 ,0 2600
425 ,0 2800
415 ,0 3000
INTRODUCTORY ECONOMETRICS WITH APPLICATIONS
Ramu Ramanathan, 5th Ed. 2002, ISBN: 0-03-034342-9
http://econweb.ucsd.edu/ rramanat/embook5.htm
HousePrices.txt
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House prices plot
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Estimation with gretl
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OLS estimation with R
1 > y <- read.table("HousePrices.txt")[,1]
2 > x <- read.table("HousePrices.txt")[,2]
3 > f <- lm (y~x)
4 > summary(f)
5
6 Call:
7 lm(formula = y ~ x)
8
9 Residuals:
10 Min 1Q Median 3Q Max
11 -53.602 -23.650 -1.192 10.948 91.898
12
13 Coefficients:
14 Estimate Std. Error t value Pr(>|t|)
15 (Intercept) 52.35091 37.28549 1.404 0.186
16 x 0.13875 0.01873 7.407 8.2e-06 ***
17 ---
18 Signif. codes: 0 *** 0.001 ** 0.01 * 0.05 . 0.1 1
19
y = + x + e
n xy x y
P P P
=
n x 2 ( x )2
P P
= y x
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Simple regression with Octave
n xy x y
P P P
=
n x 2 ( x )2
P P
1 clear;
2 load HousePrices.txt;
3
4 y = HousePrices(:,1); % price
5 x = HousePrices(:,2); % sqft
6 n = length(x)
7
8 sumx = sum(x);
9 sumy = sum(y);
10 sumxy = sum(x .* y);
11 sumx2 = sum(x .^ 2);
12 sum2x = sum(x) ^ 2;
13
(x x )(y y ) (x x ) (y y )
P P P
=
(x x )2 ( (x x ))2
P P
1 clear;
2 load HousePrices.txt;
3
4 y = HousePrices(:,1); % price
5 x = HousePrices(:,2); % sqft
6
7 xm = x - mean(x);
8 ym = y - mean(y);
9
10 sumx = sum(xm);
11 sumy = sum(ym);
12 sumxy = sum(xm .* ym);
13 sumx2 = sum(xm .^ 2);
14 sum2x = sum(xm) ^ 2;
15
y = 0 + 1 x + e (1)
y = X + e (2)
= (X 0 X )1 X 0 y (3)
1 clear;
2 load HousePrices.txt;
3
4 y = HousePrices(:,1); % price
5 x = HousePrices(:,2); % sqft
6
7 T = length(x);
8 X = [ones(T,1) x];
9
10 bhat = inv(X*X)*X*y
11
olsHousePrices3.m
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Contents
3 Goodness of Fit
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Estimated y and residuals
y = x
e = y y
1 bhat = inv(X*X)*X*y;
2 yhat = X*bhat;
3 ehat = y - X*bhat;
olsHousePrices4.m
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Plot of y , y vs x
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Plot of residuals
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Sum of Squares
(yi y )2
X
TSS =
(yi y )2
X
ESS =
ei2
X
RSS =
1 bhat = inv(X*X)*X*y;
2 yhat = X*bhat;
3 ehat = y - yhat;
4
RSS
R2 = 1
TSS
5 R2 = 1 - RSS/TSS
6 R2adj = 1 - (RSS/TSS) * ((T-1)/(T-K-1))
olsHousePrices6.m
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Contents
3 Goodness of Fit
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has a distribution
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Monte Carlo Simulation of distribution
1 T = 100;
2 N = 1000;
3
4 beta = [1 1];
5 X = [ ones(T, 1), normrnd(0, 1, T, 1) ];
6 bhat1 = zeros(N, 1);
7
8 for (i = 1:N)
9 u = normrnd(0, 2, T, 1);
10 y = X*beta + u;
11 bhat = inv(X*X) * X * y;
12 bhat1(i) = bhat(2);
13 end
14
y =1+x +u
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What theory tells us
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What theory tells us
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What theory tells us
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What theory tells us
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What theory tells us
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What theory tells us
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Contents
3 Goodness of Fit
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Serial autocorrelation
yt = Xt + ut
ut = ut1 + et
DGP1.m
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Serial autocorrelation
yt = Xt + ut
ut = ut1 + et
1 T = 100;
2 phi = 0.95;
3
4 u = zeros(T, 1);
5 u(1) = randn;
6
7 for (t=2:T)
8 u(t) = phi*u(t-1) + randn;
9 end
DGP1.m
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Distribution of with auto-correlated errors
yt = Xt + ut
ut = ut1 + et
MCDGP2.m
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DurbinWatson test
PT 2
t=2 (et et1 )
d= PT 2
t=1 et
MCDGP3.m
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