Units of measurement

Question 1

How does R^2 react to changes in units of measurement in y or x?

Answer 1

R^2 is invariant to any changes because it is the squared correlation between y and y^hat

Question 2

How do standardised beta coefficients impact the t-statistics?

Answer 2

They are unchanged

Question 3

What is the level-level model?

Answer 3

A 1 unit change in x1 causes a beta1 change in y

Question 4

What is the level-log model?

Answer 4

A 1 unit change in x1 causes a (beta1/100)% change in y

Question 5

What is the log-level model?

Answer 5

A 1 unit change in x causes a 100*beta1 percentage change in y

Question 6

What is the log-log model?

Answer 6

A 1 unit change in x causes a beta1% change in y

Question 7

For a quadratic model (y=beta0+betax1+betax1^2+u), how does a unit change in x impact y?

Answer 7

Use partial differentiation: change in y = (beta1 + 2betax1) * change in x1… to find turning point, set this equal to 0 and solve.