Introductory Econometrics: Intuition, Proof, and Practice

673 Pages·2011·11.38 MB·English

by  Jeffrey Zax

I E
ntroductory conomEtrIcs
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I E
ntroductory conomEtrIcs
Intuition, Proof, and
Practice
Jeffrey S. Zax
Stanford Economics and Finance
An Imprint of Stanford University Press S
Stanford, California N
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Stanford University Press
Stanford, California
© 2011 by the Board of Trustees of the Leland Stanford Junior University.
All rights reserved.
No part of this book may be reproduced or transmitted in any form or by any means,
electronic or mechanical, including photocopying and recording, or in any information
storage or retrieval system without the prior written permission of Stanford University Press.
Printed in the United States of America on acid-free, archival-quality paper.
Library of Congress Cataloging-in-Publication Data
Zax, Jeffrey S.
Introductory econometrics: intuition, proof, and practice / Jeffrey S. Zax.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8047-7262-4 (cloth : alk. paper)
1. Econometrics—Textbooks. I. Title.
HB139.Z39 2011
330.01′5195—dc22 2010027083
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To all the students who have trusted this book to help them understand; to Judy, Jacob,
and Talya, who help me understand every day; and to Zvi Griliches, who helped
us all understand.
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Brief Contents
Contents ix
List of Tables and Figures xv
Preface xxi
Chapter 1 What is a regression? 1
Chapter 2 the essential tool 35
Chapter 3 Covariance and Correlation 57
Chapter 4 fitting a Line 88
Chapter 5 from sample to Population 136
Chapter 6 Confidence intervals and Hypothesis tests 191
Chapter 7 inference in ordinary Least squares 232
Chapter 8 What if the Disturbances Have nonzero expectations
or Different Variances? 281
Chapter 9 What if the Disturbances Are Correlated? 321
Chapter 10 What if the Disturbances and the explanatory Variables Are related? 363
Chapter 11 What if there is More than one x? 411
Chapter 12 Understanding and interpreting regression with two x’s 453
Chapter 13 Making regression More flexible 501
Chapter 14 More than two explanatory Variables 541
Chapter 15 Categorical Dependent Variables 582
Epilogue 627
Appendix 629
References 637
Index 639
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Contents
List of Tables and Figures xv
Preface xxi
Chapter 1 What is a regression? 1
1.0 What We Need to Know When We Finish This Chapter 2
1.1 Why Are We Doing This? 3
1.2 Education and Earnings 5
1.3 What Does a Regression Look Like? 6
1.4 Where Do We Begin? 6
1.5 Where’s the Explanation? 7
1.6 What Do We Look for in This Explanation? 9
1.7 How Do We Interpret the Explanation? 12
1.8 How Do We Evaluate the Explanation? 17
1.9 R2 and the F-statistic 19
1.10 Have We Put This Together in a Responsible Way? 20
1.11 Do Regressions Always Look Like This? 25
1.12 How to Read This Book 28
1.13 Conclusion 28
Exercises 29
Chapter 2 the essential tool 35
2.0 What We Need to Know When We Finish This Chapter 35
2.1 Is This Really a Math Course in Disguise? 37
2.2 Fun with Summations 38
2.3 Constants in Summations 41
2.4 Averages 43
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