Econometrics Cheat Sheet bby Tyler Ransom, University of Oklahoma ‘tyleransom Data & Causality Basics about data types and eansalty ‘Types of data Experimental Data from randomized experiment Obeereational Data collected passively Cross-sectional Multiple units, one point in time ‘Time series Single unit, multiple points in time Longitudinal (or Panel)Multiple units followed over multiple tne periods Experimental data ‘© Correlation > Causality ‘© Very rare in Social Sciences Statistics basics We examine a random sample of data to learn about the population Random sample Parameter (@) Extimator of @ Representative of population Some number describing population Fale assigning value of to sample eg. Sample average, Y = DN ‘What the estimator spits aut for particular sample (6) Distribution of estimates across all possible samples BWW) -0 Estimate of @ Sampling distribution Bias of estimator W Eificiency W efficient if Var(W) < Var(W) Consletency W consistent If + @ a5 N+ 20 Hypothesis testing ‘The vay we answer yes/no questions about our population using a simple of data, "Does increasing public scl pending increase student achiever “Typically, Hp :8 =0 ‘Typically. Hy 8 20 ‘Tolerance for making Type T enor: (ex. 10%, 5%, or 1%) ‘Some function of the sample of di Valtieof Tse that reject My if [T]> e: depend om a: f depends om if I- or 2-sided test Largest at which fll to reject Hp reject Ho if p< Simple Regression Model grein i useful becnise we ean etnaten ceteris paribus reltionsiip between some variable = and our outcome y null hypothesis (Ho) Alt. hypothesis (,) cance level (2) test statistic (7) critial valve (e) pevalue y= Pot etu We want to estimate fi, which gives ws the effect of = om OLS formulas To estimate fy and 5, we make two assumptions 1 Ew=0 2. Elale) When these E(u) for alls 1 we get the fll formulas: Sted values (G) residuals (i) ‘Total Sum of Squares SS: Resquared (R2) R= “frac. of ar, in y explained by 2" Algebraic properties of OLS estimates 8 = 0 (mean sum of residual 200) SEN #1 = 0 oero covariance bet. and resis) ‘The OLS line (SRF) always pasies through (2.0) SSE4SSR=SST osmest Interpretation and functional form (Our model is restricted to be Tineat in parameters But not linear in 2 (Other functional forms can give more realistic model Model DV RHS Interpretation of Tevehievel = Ay= fie Levellog — y ——log(a) Ay = (31/100) 192) Loglevel log(y) Ay = (10033) a2 logly) —lou(e) Hay = Ae Yet! y= (842592) Ae Multiple Regression Model Multiple regression ls more utful than snpleragreaion became we can more pausblyextimate celeris paribus ‘ehtionshipe (he B (ula) = Bw) more pane) y= Botan + Bi,---sBk: partial effect of each of the 2's on y + Pare tu Var (residualized =) where “esidualized 2;" means the residuals from OLS regression of y on all other 2 (he #iys-oss 1s p415 Gauss-Markov Assumptions ‘vis a linear function ofthe 3's and 2's are randomly sampled from population 26) = E(w) =0 (Unconfoundesiness) 1 2 3. No porfct multcolines 4 Bln. Var(ule1, When (1)-(4) hol When (1)-6) hol ‘Variance of u (a.k.a. “error variance”) ssR 24) = Var (u) = 0? (Homockedasticity) OLS is unbiased; ie, £13) = By OLS is Hest Linear Unbiased Estimator Variance and Standard Error of 3, 5ST) Varta) = N 1)Ver(as Dew-) fom a regresin War 2) on all other 2s Standard deviation Standard eer: sold) = Classical Linear Mode! (CLM) Aad a 6th sasamption to Gate area 6 win dnetted 1 (0,02) ood this to know what the distribution of Bi Otherwise, can't confuct hypothesis ets about the 3s ‘Testing Hypotheses about the "s Under 4 (D+(0, can test hpotheses bout he t-test for simple hypotheses “To txt a simple hypoth ike 184 Ha; 40 ‘where 0 is the mull hypothesized value, Reject Ho if »< a or if |e] > e (See: Hypothesis testing)