# 3.) Learning to Use Regression Analysis Flashcards

1
Q

Once a dependent variable is chosen, it is logical to follow this sequence…

A
1. ) Review the literature and develop the theoretical model.
2. ) Specify the model: Select the independent variables and the functional form.
3. ) Hypothesize the expected signs of the coefficients.
4. ) Collect the data. Inspect and clean the data.
5. ) Estimate and evaluate the equation
6. ) Document the results.
2
Q

After selecting the dependent variables, the specification of a model involves choosing the following components…

A
1. ) The independent variables and how they should be measured,
2. ) the functional (mathematical) form of the variables, and
3. ) the properties of the stochastic error term
• A regression equation is specified when each of these elements has been treated appropriately.
3
Q

A mistake of any of he three components of a model after selecting the dependent variable results in a ….

A

Specification Error

4
Q

What should specifying goal be?

A

to specify only relevant explanatory variables, those expected theoretically to assert a substantive influence on the dependent variable

5
Q

what sort of other theoretical economic concepts should be included?

A

Theory also indicates that complementary and substitute goods are important

6
Q

A dummy variable takes on…

A

the values of one or zero depending on whether a specified condition holds.

7
Q

In the demand equation for a final consumption good…

A

the quantity demanded is expected to inversely related to its price and the price of a complementary good and positively related to consumer income and the price of a substitute good.

8
Q

The first step in the written development of a regression model..

A

usually is to express the equation as a general function

9
Q

Step 4

A

Collect the Data, Inspect and Clean the Data

10
Q

All conclusions about signs, significance, and economic theory are…

A

independent of units of measurement

11
Q

The excess number of observations (three) over the number of coefficients to be estimated is the …

A

degrees of freedom

12
Q

The more degrees of freedom there are, the better because…

A

When the number of degrees of freedom is large, every positive error is likely to be balanced by a negative error

13
Q

A constant factor added to a variable alters only…

A

the intercept term without changing the slope coefficient itself

14
Q

An outlier is…

A

an observation that lies outside the range of the rest of the observations, and looking for outliers is an easy way to find data entry errors

15
Q

Step 5

A

Estimate and Evaluate the Equation

16
Q

Step 6

A

Document the Results

17
Q

Step 1

A

Review the literature and develop the theoretical model

18
Q

Step 2

A

Specify the model: select the independent variables and the functional form

19
Q

Step 3

A

Hypothesize the expected signs of the coefficients