This website uses cookies to ensure you have the best experience.

# Econometrics Essay

1877 words - 8 pages

1. A scatter-plot is a graph made by plotting ordered pairs in a coordinate plane to show the correlation between two sets of data. It helps to show us the trends between the two variables for example whether there is a positive correlation, a negative correlation or no correlation at all.

This graph shows the relationship between hours and age. We can see from the regression line that there is a negative correlation between the two variables. The correlation table for gives a correlation coefficient of -0.4222. This shows quite a strong negative association. This means that the older you are the fewer hours you will work.
| HOURS |
AGE | -0.422170403728502 |

Here we have a graph ...view middle of the document...

Error | t-Statistic | Prob.   |
| | | | |
| | | | |
C | 18.22848 | 1.431566 | 12.73324 | 0.0000 |
WAGE | 2.293989 | 0.181412 | 12.64520 | 0.0000 |
| | | | |
| | | | |
R-squared | 0.349204 |     Mean dependent var | 32.55000 |
Adjusted R-squared | 0.347020 |     S.D. dependent var | 18.76792 |
S.E. of regression | 15.16582 |     Akaike info criterion | 8.282610 |
Sum squared resid | 68540.67 |     Schwarz criterion | 8.307302 |
Log likelihood | -1240.392 |     Hannan-Quinn criter. | 8.292492 |
F-statistic | 159.9010 |     Durbin-Watson stat | 1.971576 |
Prob(F-statistic) | 0.000000 | | | |
| | | | |
| | | | |

Regression analysis is used to analyse how the typical value of the dependent variable changes when any one of the independent variables is varied, while the other independent variables are held fixed. It also helps to explain the impact of changes in an independent variable on the dependent variable.
The linear relationship between hourly wage and hours worked can be expressed using the equation, which we estimate through the Ordinary Least Squared Method (OLS):
Hours worked = 18.23 + 2.29 Wage
β1 represents the slope (or the change in hours worked per unit change in wage rate)

The coefficient of determination (R²) is the portion of the total variation in the hours worked (the dependant variable) that is explained by variation in the wage rate (the independent variable). This basically is trying to explain the effect that wage has on the number of hours worked. From the table above R²= 0.3492 (which we can round up to 35%) which shows that about 35% of the variation in hours worked is due to the variation in the wage rate.
The standard error of regression (SER) measures the amount of variability in the points around the regression line. It is the standard deviation of the data points as they are distributed around the regression line. The standard error of the estimate can be used to develop confidence intervals around a prediction. A smaller S.E of regression represents a more accurate estimation. With the data we have in this case the S.E of regression is 15.27 and if we take into consideration the sample size of 300 it can be said that it is reasonably accurate.
Null and alternative hypotheses
H0: β1 = 0 (no linear relationship)
H1: β1 0 (linear relationship does exist)
To calculate the t- statistic we use the equation shown below

t = (2.294 – 0) / 0.1814 = 12.65
tn-2,α=t298,0.05=1.645
We reject the null hypothesis as the t-statistic is larger than the critical value (12.65>1.645) and we favour the alternative hypothesis. Hence we conclude that there is strong evidence that there is a linear correlation between the two variables, an increase in hours worked leads to an increase in wage.
The F-statistic test confirms the result of the t- test. Also due to the fact that the F-statistic (159.9) > F1,n-2,α, we can reject the null hypothesis of no...

## Other Papers Like Econometrics

### Econometrics Essay

1361 words - 6 pages Testing the two-parameter asset pricing theory is difficult due to a mathematical equivalence between the individual return/beta’ linearity relation and the market portfolio’s mean-variance efficiency, any valid test presupposes complete knowledge of the true market portfolio’s composition. This implies, inter alia, that every individual asset must be included in a correct test. Errors of inference inducible by incomplete tests are discussed and

### Econometrics Essay

1846 words - 8 pages 1. SUMMARY The main objective of the paper is to compare the professional athletes to non-athletes on subjective time discounting (time preference). The subjective time discount rate is a measure of the amount an individual is willing to receive in time to come, compared to the amount an individual receives in the present. In other words, the longer an individual willing to wait, the lower the subjective time discount rate of this individual

### Statistics And Econometrics

366 words - 2 pages Statistics and Econometrics Mid-Term – Bank Loan Default I. Introduction The question requires us to understand what factors could lead to people defaulting on their loans. The variables that will be discussed include age, education, employment, address, income etc. An overview of the data will be provided along with assessing inter-relationships among variables as well as providing a good fit model. II. Overview of Data The sample

### Financial Econometrics

1700 words - 7 pages Warren Buffett indicator Group 13 Members: Zerui Yang Qingjin Wa Szeyeung Chan Junping Zhang Introduction = ∗ Introduction 1. One factor model: S&P500~Market Cap/GDP 2. Four factor model: S&P500~Market Cap/GDP+Unemplyment rate +CPI+Gold Price 3. Three factor model S&P500~Market Cap/GDP +CPI+Gold Price 4. Tests • Normality • Non-linearity • Multicollinearity • Other diagnostic(leverage

### Five Guys Econometrics

1158 words - 5 pages The Color Red In Director Sam Mendes’ American Beauty, Cinematographer Conrad Hall utilizes great lengths of visual silence to signify the enveloping, jarring presence of Lester Burnham’s own, imaginary world. Conrad Hall also creates startling visual silence when intensely focusing upon each character of American Beauty, and consistently morphs the lack of apparent objects into an inconspicuous focus on the striking color of Red. Through this

### Econometrics Problem Set 4 Solution School Of Business

821 words - 4 pages Problem 1: i) All the coefficients are significant, because t (crit) = 1,96 is smaller than the absolute values of these three coefficients β1, β2 and β3. Estimated equation is: Log (wage) = 0.128 + 0.0904educ + 0.041exper – 0.000714exper2 (0.106) (0.0075) (0.0052) (0.000116) n = 526, R2 = 0.30 ii) Yes, the coefficient is significant because t-statistics absolute value 6,16 is greater than t

### no thanks

1311 words - 6 pages Architecture & Software Development - Property and Liability Insurance Operations - Database Management - Corporate Risk Mgmt - Global Business Policies - Retirement Plans - International Human Resource Mgmt - Managerial Accounting - Econometrics ACTIVITIES & AWARDS: Member, Gamma Iota Sigma Professional Risk Mgmt, Insurance and Actuarial Science Fraternity Math Competition Committee, Fall 2008 Community Affairs Committee

### Subjects Nova

2277 words - 10 pages . Pedro Santa Clara Class: TB - Room: A223 2237 | Financial Econometrics | Prof. Paulo M. M. Rodrigues Class: TA - Room: A223 2414 | Financial Management | Prof. Melissa Prado Class: TA - Room: 219 2430 | Advanced Marketing | Prof. Jorge Velosa Class: TB - Room: 219 2430 | Advanced Marketing | Prof. Jorge Velosa Class: TA - Room: 219 2414 | Financial Management | Prof. Melissa Prado Class: TB - Room: 240 2253 | Corporate Finance

### Course Outline

1875 words - 8 pages Course outline for BUSN85 STRATEGIC CORPORATE FINANCE, Fall 2014, 7.5 credits Introduction The main objective of the course is to further your understanding of the theory and econometrics of corporate finance beyond what is covered in previous courses in corporate finance (esp BUSN92 Empirical Corporate Finance). It is not necessary to have completed BUSN92 Empirical Corporate Finance (corporate finance students), nor BUSN80 Financial

### Economics Q & A

1071 words - 5 pages / Total Assets Return on Common Equity (ROE) is the ratio of a firm’s net income to its equity. It shows the return that a firm is getting over each dollar of its equity. It tells the investors if they are investing at the right place. It can be calculated as ROE = Net income / Common Equity Question: What is meant by the term econometric techniques? Provide at least two examples of its use in financial studies. Econometrics is a quantitative

### Content and Description of Courses in Economics Department at the University of Jos

1194 words - 5 pages method; Correlation coefficient; Coefficient of determination; Analysis of time series; Moving averages; Estimation of trend; Estimation of seasonal variation; Estimate of cyclical variation; Forecasting; Index numbers; Price relative; Quality and volume relative; Value relative. ECO 314 – Econometrics and Research Methods I: Definition of research, the role of research in development; The uses of different statistical procedures including

## Related Essays

### Econometrics Essay

578 words - 3 pages ECONOMETRICS INTRODUCTION We will examine the data set of wealth, age, family size and income. In this data, our dependent variable is wealth and independent variables are age, family size and income. We will estimate and interpret how independent variables affect the dependent variable. We will use that equation: WEALTH = c1+ c2INCOME + c3AGE + c4FSIZE + u DATA AND METHODOLOGY The data of wealth

### Econometrics Essay 1150 Words

1150 words - 5 pages ACKNOWLEDGEMANT First of all, we are grateful to The Almighty God for establishing strength to us to complete this report that given by our lecturer. We are really grateful because we manage to complete our assignment in subject Econometrics within the time given by our beloved lecturer. We are very thankful to our Econometrics lecturer, Sir Abdul Razak Bin Jambari, for his valuable guidance, encouragement, and co-operation until the report

### Econometrics Essay 4533 Words

4533 words - 19 pages Mini Research On Size of organization and its influence on adopting centralization in Nepalese Banks Submitted to: Prof. Subas KC Course Instructor, Organizational Theory Submitted by: Dipendra Karki (Roll No. 11605) Ganesh Bhattarai (Roll No. 11606) Pramila Ojha (Roll No. 11611) MPhil - II Term, Fall 2011, KUSOM June, 2012

### Econometrics Essay 3272 Words

3272 words - 14 pages MacLaren Dudley 4/21/14 China’s Economic Emergence Introduction China and Japan both posses major economies that produce a high annual Gross Domestic Product. The two countries consistently hold the second and third highest GDP’s after the United States of America. Recently, China has overtaken Japan and is now producing the second highest GDP overall. An investigation into the history of the two countries’ forms of governments and