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Econometrics Beat's Blog

A Tale of Two Tests

September 7, 2011 Comments (0)

Here's a puzzle for you. It relates to two very standard tests that you usually encounter in a first (proper) course in econometrics. One is the Chow (1960) test for a structural break in the regression model's coefficient vector; and the other is the Goldfeld and Quandt (1965) test for homoskedasticity, against a particularly simple form of heteroskedasticity. What's the puzzle, exactly? These tests are very straightforward. Indeed, the Chow test is just...

Where are You Now?

September 5, 2011 Comments (0)

One of the great thrills of this job is working together with students as they learn about econometrics. I've been most fortunate to have been associated with quite a few students who have had enough interest in the subject to subsequently go on to undertake graduate research with me. Along the way, I've worked with some great people. They've been talented, dedicated, and a lot of fun to be around. If they learned anything from me, then I'm grateful - because I certainly learned...

Still Searching for the Number of Weeks in a Year

September 1, 2011 Comments (0)

When I put up a post titled "How Many Weeks Are There in a Year" back in April, little did I know how many hits it would get. For a while I was intrigued to see that visitors kept arriving. They still do - every day, without fail. Then I realized the reason why. It wasn't because the readers of this post were in search of econometric enlightenment. Oh no! There was a much more obvious reason. They genuinely want to know the answer to the question posed in the title of that post! A quick...

Beware of Econometricians Bearing Spreadsheets

August 31, 2011 Comments (0)

"Let's not kid ourselves: the most widely used piece of software for statistics is Excel"(B. D. Ripley, RSS Conference, 2002) What a sad state of affairs! Sad, but true when you think of all of the number crunching going on in those corporate towers. With the billions of dollars that are at stake when some of those spreadsheets are being used by the uninitiated, you'd think (and hope) that the calculations are squeaky clean in terms of reliability. Unfortunately, you'd be wrong! A huge...

An Overly Confident (Future) Nobel Laureate

August 30, 2011 Comments (0)

For some reason, students often have trouble interpreting confidence intervals correctly. Suppose they're presented with an OLS estimate of 1.1 for a regression coefficient, and an associated 95% confidence interval of [0.9,1.3]. Unfortunately, you sometimes see interpretations along the following lines: There's a 95% probability that the true value of the regression coefficient lies in the interval [0.9,1.3]. This interval includes the true value of the...

Missing Keys and Econometrics

August 29, 2011 Comments (0)

There couldn't possibly be any connection between conducting econometric analysis and looking for your lost keys, could there? Or, maybe there could! Jeff Racine (McMaster U.) put a nice little piece up on his web page at the start of this month. It's titled Find Your Keys Yet?, and has the sub-title "Some Thoughts on Parametric Model Misspecification". Jeff rightly points out some of the difficulties associated with the concept of "the true model" in econometrics, and the importance of...

Levelling the Learning Paying Field

August 27, 2011 Comments (0)

Whenever it comes time to assign a textbook for a course, I get the jitters. It's the price tag that always gets to me! And if it gets to me, then surely it must result in gasps of disbelief from the students (and parents) who are affected by my choices. Often, I can (and do) make sure that the one text I assign can be used for two back-to-back courses. Hopefully, that helps a bit. However, the cost of textbooks can still be a sizeable burden. Then, when students go to...

Reproducible Econometric Research

August 25, 2011 Comments (0)

I doubt if anyone would deny the importance of being able to reproduce one's econometric results. More importantly, other researchers should be able to reproduce our results to verify (a) that we've done what we said we did; (b) to investigate the sensitivity of our results to the various choices we made (e.g., functional form of our model, choice of sample period, etc.); and (c) to satisfy themselves that they understand our analysis. However, if you've ever tried to literally reproduce...

MoneyScience

August 24, 2011 Comments (0)

MoneyScience - which describes itself as "the community resource for Quantitative Finance, Risk Management and Technology Practitioners, Vendors and Academics" - has recently released version 3 of its site. There's a great deal of interesting work going on in "Financial Econometrics", and this is one site that provides really good content and excellent networking facilities that will help keep econometricians up to speed with what is going on in the finance community at large. I'm...

Innovations in Editing

August 24, 2011 Comments (0)

I've posted in the past (here and here about some of my experiences as an academic journal Editor. It has its ups and downs, for sure, but ultimately it's a rewarding job. Preston McAfee (Yahoo! & Caltech) is currently the Editor of Economic Inquiry, where he's introduced some important innovations into the editorial process. He was formerly Co-Editor of American Economic Review. As well as being a highly respected economist, Preston has a wonderful way with words. His thoughts...