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CFA L2-QA-Multi Reg
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multiple regression
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How to use Stat s/w result?
(1) model as a whole -> F-test & R^2,
(2) individual param -> T-test &cofficient
(3) look for multiColin , inconsistancy between F-test and t-test"
formula: adjusted R^2
1- { [ (n-1)/(n-k-1) ] * (1-R^2) }
how many qualitative indep var (dummy var) do we need for 4 quarters?
only 3, becoz it is n-1
formula: Breush-Pagan Chi-sq test
n * R^2 of 2nd regression (k degree of freedom at Chisq table) (k is num of indep var)
formula: Durbin-watson test
DW = 2(1-t)
what is type I error?
type I is false positive ! It is in reject region, but in fact, Shouldn't be
what if both Condit Heteroskeda & serial corr exist, which corrected std err should we use?
"heteroskeka only: White
auto corr only: Hansen
both: Hansen"
what are the 6 common model misspecification for regression model?
"1.omiting a var (e.g. omitting a indep var Might cause error term to correlate with other Indep Var)_
2.var should be transformed (maybe sales^2, maybe Log(market cap)
3.incorrect pooling of data (e.g. long term model, but use 3 month tick data)
4.using lagged Dep var as indep var (should use AR model instead)
5. forecasting the past (end of quarter GDP to forecast something during that quarter)
6.measure indep var /w Error (e.g. Free float as proxy for Corp Governance. )"
how to detect HeteroSkeda
"1. visual examine the plot
2. BP test"
does 2nd regression mean?
"1. 1st regression examine relationship between Y and X's
2. 2nd reg examine relationship between error term and X's"
what does pos / neg serial correlation affect test-statistics?
"* pos serial corr -> cause std error too small -> test stat too big -> type I
* Neg serial corr -> std error too Big -> test stat too Small -> type II"
is multi colin likely to exists in econ model?
Yes, very likely
what is rule of thumb, test of multi colin with Correlation?
if correlation between indep var >0.7, can say multi colin is potential problem
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