Economics 3400

Brief Final Exam Review

Jon Michel
List of Topics

Tests for Categorical Data:

One Sample
Two Sample (Wont be on the final)
Analysis of (X , Y ) data:
Correlation Coefficent
Linear Regression:
Without Intercept: Y = X + 
With Intercept: Y = + X + 
Multiple Covariates Y = + X 1 1 + + X K K + 
R 2 : Meaning and Uses.
One Sample Categorical

Data can only take on a limited number of outcomes, we want

to test if the true population has a certain percentage of each
outcome.

H0 : P(Xi = r1 ) = p1 , ..., P(Xi = rR ) = pR

and
(N1 p1 n)2 (NR pR n)2
S= ++
p1 n pR n
which has a 2 (R 1) distribution.
Correlation Coefficent

The sample correlation coefficent is

1
n1 [(x1 x)(y1 y ) + (xn x)(yn y )]
r= .
sx sy

This relates to the correlation coefficent for random variables

which is
E[(X X )(Y Y )]
X ,Y = .
X Y
Linear Regression Without Intercept

Model is Y = X + . Estimation gives

X1 Y1 + + Xn Yn
= .
X12 + + Xn2

Testing H0 : = C:
r
C 1 2
S = nq (X + + Xn2 )
( n1 (e12 + + en2 ) n 1

Has a normal, or Z, distribution.

-Confidence Intervals.
Linear Regression

Model is Y = + X + . Estimation gives:

(X1 X )(Y1 Y ) + + (Xn X )(Yn Y )

=
(X1 X )2 + + (Xn X )2

and
= Y X .
Time Series Data

A special case of (X , Y ) data where the data is all

(1, Y1 ), (2, Y2 ), ...., (T , YT ).

Testing for a linear trend (Just Linear Regression!)

Testing for a nonlinear trend (Wont be on the final).
Multiple Regression

Interpretation of the model

Y = + 1 X 1 + + K X K .

Omitted Variable Bias

Using one covariate X to make multiple covariates.

R2

SSfit
R2 = 1 ,
SStotal
where
SStotal = (Y1 Y )2 + + (Yn Y )2
and
SSfit = (Y1 Y1 )2 + + (Yn Yn )2 .
Here Yi depends on which model we estimated:
Simple Regression without Intercept: Yi = Xi .
Regression with intercept: Yi = + Xi .
Multiple Regression: Yi = + 1 Xi1 + + K XiK .