ECON1203 radar

Blair Wang BIT12

DNAQ too many times in past papers - read the question very carefully. You have reading time for this
exam and there are no MCQ to worry about!

For CI, find half-width first. Then set up CI around the observation.

Define type I and type II error in terms of probability e.g. P(Type II error) = P(xbar>340|mu=342)

Hypothesis testing steps:
1. Hypotheses
2. Standardise observation to test statistic
3. Decision rule
4. Compare & conclude

Assumptions about disturbances:
E(epsilon_i | x_i) = 0
Var(epsilon_i) = (sigma_epsilon)^2
epsilon_i~N
Cor(epsilon_i, epsilon_j) = 0 for given i,j
Other assumptions:
Variance in X
Simple Random Sampling
Linear Model
Plus, no perfect multicollinearity

"the t-stat and P-value in the EXCEL output are derived from two-tail tests with H0: associated population
parameter = 0"

oh, and when analysing coefficients - it is the ceteris paribus marginal effect! REMEMBER THE CETERIS
PARIBUS.

T-distribution
tl;dr two different issues:
1. is sample mean distribution actually normal-shaped?
2. what is the underlying population variance?

(1) becomes a problem if underlying distribution is not normal. We fix this with CLT.
(2) becomes a problem if we only know sample variance. We fix this by using t-distribution.

Our fixes work independently, but CANNOT be used at the same time. But CLT always takes precedence
over t-distribution because it says BOOM! YOUR DISTRIBUTION IS NORMAL!