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Sep 30, 2019

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Homework Review

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- AP Statistics Midterm
- How to Interpret Regression Analysis Results_ P-values and Coefficients _ Minitab.pdf
- 3092545_1_econreview-questions.docx
- 3092545_1_econreview-questions.docx
- Multiple Linear Regression
- Statistical and Numerical Methods for Chemical Engineers
- Regression 1
- Reg & Corr (With Numercials).pdf
- Simple Linear Regression-Part 1
- Regression
- ch13_S06.pdf
- sakshamassignment2
- File 3
- NSE Correlation with Macro Economic Variables
- 67309sipos&bizoi
- Correlations.docx
- Social Research Methods
- Absent Seem of Employess RMM Project
- Examples.pdf
- Yu Shuo

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1. (a) Why does OLS estimation involve taking vertical deviations of the points to

the line rather than horizontal distances?

(b) Why are the vertical distances squared before being added together?

(c) Why are the squares of the vertical distances taken rather than the absolute

values?

2. Explain, with the use of equations, the difference between the sample regression

function and the population regression function.

3. What is an estimator? Is the OLS estimator superior to all other estimators? Why

or why not? 4. What ﬁve assumptions are usually made about the unobservable

error terms in the classical linear regression model (CLRM)? Brieﬂy explain the

meaning of each. Why are these assumptions made?

E(Ri)= Rf +βi[E(Rm)− Rf ]

The ﬁrst step in using the CAPM is to estimate the stock’s beta using the market

model.

where Rit is the excess return for security i at time t, Rmt is the excess return on a

proxy for the market portfolio at time t, and ut is an iid random disturbance term.

The coefficient beta in this case is also the CAPM beta for security i.

Suppose that you had estimated and found that the estimated value of beta for a

stock, ˆ β was 1.147. The standard error associated with this coefﬁcient SE( ˆ β) is

estimated to be 0.0548.

A city analyst has told you that this security closely follows the market, but that it

is no more risky, on average, than the market. This can be tested by the null

hypotheses that the value of beta is one. The model is estimated over 62 daily

observations. Test this hypothesis against a one-sided alternative that the security

is more risky than the market, at the 5% level. Write down the null and alternative

hypothesis. What do you conclude? Are the analyst’s claims empirically veriﬁed?

7. The analyst also tells you that shares in Chris Mining PLC have no systematic

risk, in other words that the returns on its shares are completely unrelated to

movements in the market. The value of beta and its standard error are calculated to

be 0.214 and 0.186, respectively. The model is estimated over 38 quarterly

observations. Write down the null and alternative hypotheses. Test this null

hypothesis against a two-sided alternative.

8. Form and interpret a 95% and a 99% conﬁdence interval for beta using the

ﬁgures given in question 7.

9. Are hypotheses tested concerning the actual values of the coefﬁcients (i.e. β) or

their estimated values (i.e. ˆ β) and why?

10. Using EViews, select one of the other stock series from the ‘capm.wk1’ ﬁle

and estimate a CAPM beta for that stock. Test the null hypothesis that the true beta

is one and also test the null hypothesis that the true alpha (intercept) is zero. What

are your conclusions?

Review questions3

relationship between the t- and the F-distributions.

For questions 2–5, assume that the econometric model is of the form

yt = β1 +β2x2t +β3x3t +β4x4t +β5x5t +ut

2. Which of the following hypotheses about the coefﬁcients can be tested using

a t-test?

Which of them can be tested using an F-test? In each case, state the number

of restrictions.

(a) H0 : β3 =2

(b) H0 : β3 +β4 =1

(d) H0 : β2 =0 and β3 =0 and β4 =0 and β5 =0

(e) H0 : β2β3 =1

the context of? Why is this null hypothesis always of interest whatever the

regression relationship under study? What exactly would constitute the alternative

hypothesis in this case?

4. Which would you expect to be bigger – the unrestricted residual sum of squares

or the restricted residual sum of squares, and why?

question 2, part (c). What would constitute the restricted regression? The

regressions are carried out on a sample of 96 quarterly observations, and the

residual sums of squares for the restricted and unrestricted regressions are 102.87

and 91.41, respectively. Perform the test. What is your conclusion?

6. You estimate a regression of the form given by (3.52) below in order to evaluate

the effect of various ﬁrm-speciﬁc factors on the returns of a sample of ﬁrms. You

run a cross-sectional regression with 200 ﬁrms

Calculate the t-ratios. What do you conclude about the effect of each variable on

the returns of the security? On the basis of your results, what variables would you

consider deleting from the regression? If a stock’s beta increased from 1 to 1.2,

what would be the expected effect on the stock’s return? Is the sign on beta as you

would have expected? Explain your answers in each case.

dependent variable

(b) R2,

where ut and vt are iid disturbances and x3t is an irrelevant variable which does

not enter into the data generating process for yt. Will the value of

(a) R2,

(b) Adjusted R2, be higher for the second model than the ﬁrst? Explain your

answers.

9. Re-open the CAPM E views ﬁle and estimate CAPM betas for each of the other

stocks in the ﬁle.

(a) Which of the stocks, on the basis of the parameter estimates you obtain, would

you class as defensive stocks and which as aggressive stocks? Explain your

answer.

(b) Is the CAPM able to provide any reasonable explanation of the overall

variability of the returns to each of the stocks over the sample period? Why or why

not?

10. Re-open the Macro ﬁle and apply the same APT-type model to some of the

other time-series of stock returns contained in the CAPM-ﬁle.

(a) Run the stepwise procedure in each case. Is the same sub-set of variables

selected for each stock? Can you rationalize the differences between the series

chosen?

(b) Examine the sizes and signs of the parameters in the regressions in each case –

do these make sense?

Review questions

1. Are assumptions made concerning the unobservable error terms (Ɛí) or about

their sample counterparts, the estimated residuals (ˆ Ɛí))? Explain your answer.

2. What pattern(s) would one like to see in a residual plot and why?

3. A researcher estimates the following model for stock market returns, but thinks

that there may be a problem with it. By calculating the t-ratios, and considering

their signiﬁcance and by examining the value of R2 or otherwise, suggest what the

problem might be.

4. (a) State in algebraic notation and explain the assumption about the CLRM’s

disturbances that is referred to by the term ‘homoscedasticity’.

(b) What would the consequence be for a regression model if the errors were not

homoscedastic?

(c) How might you proceed if you found that(b) were actually the case?

5. (a) What do you understand by the term ‘autocorrelation’?

(b) An econometrician suspects that the residuals of her model might be auto

correlated. Explain the steps involved in testing this theory using the Durbin–

Watson (DW) test.

(c) The econometrician follows your guidance (!!!) in part (b) and calculates a

value for the Durbin–Watson statistic of 0.95. The regression has 60 quarterly

observations and three explanatory variables (plus a constant term). Perform the

test. What is your conclusion?

(d) In order to allow for autocorrelation, the econometrician decides to use a model

in ﬁrst differences with a constant

By attempting to calculate the long-run solution to this model, explain what might

be a problem with estimating models entirely in ﬁrst differences.

(e) The econometrician ﬁnally settles on a model with both ﬁrst differences and

lagged levels terms of the variables

+β7x4t−1 +vt

econometric model

Δ yt = β1 +β2x2t +β3

7. What might Ramsey’s RESET test be used for? What could be done if it were

found that the RESET test has been failed?

8. (a) Why is it necessary to assume that the disturbances of a regression model are

normally distributed?

(b) In a practical econometric modeling situation, how might the problem that the

residuals are not normally distributed be addressed?

(b) A ﬁnancial econometrician thinks that the stock market crash of October 1987

fundamentally changed the risk–return relationship given by the CAPM equation.

He decides to test this hypothesis using a Chow test. The model is estimated using

monthly data from January 1980–December 1995, and then two separate

regressions are run for the sub-periods corresponding to data before and after the

crash.

The model is

so that the excess return on a security at time t is regressed upon the excess return

on a proxy for the market portfolio at time t. The results for the three models

estimated for shares in British Airways (BA) are as follows:

1981M1–1995M12

1981M1–1987M10

1987M11–1995M12

(c) What are the null and alternative hypotheses that are being tested here, in terms

of α and β? (d) Perform the test.

10. For the same model as above, and given the following results, do a forward and

backward predictive failure test:

1981M1–1995M12

rt =0.0215+1.491rmt RSS=0.189 T =180 (4.83)

1981M1–1994M12

1982M1–1995M12

regression model when you are conducting a Chow test for parameter stability.

Will the same problem arise if you were to conduct a predictive failure test? Why

or why not?

13. Re-open the ‘macro.wf1’ and apply the stepwise procedure including all of the

explanatory variables as listed above, i.e. erased dropped credit inﬂation money

spread term with a strict 5% threshold criterion for inclusion in the model. Then

examine the resulting model both ﬁnancially and statistically by investigating the

signs, sizes and signiﬁcances of the parameter estimates and by conducting all of

the diagnostic tests for model adequacy.

Key points unit 1 Introduction

■ The three steps in applying financial econometrics are model selection, model

estimation, and model testing. In model selection, the modeler chooses a family of

models with given statistical properties. Financial economic theory is used to

justify the model choice. The financial econometric tool used is determined in this

step.

■ Data mining is an approach to model selection based solely on the data and,

although useful, must be used with great care because the risk is that the model

selected might capture special characteristics of the sample which will not repeat in

the future.

number of parameters that have to be estimated from sample data. Model

estimation involves finding estimators and understanding the behavior of

estimators.

■ Model testing is needed because model selection and model estimation are

performed on historical data and, as a result, there is the risk that the estimation

process captures characteristics that are specific to the sample data used but are not

general and will not necessarily reappear in future samples.

■ Model testing involves assessing the model’s performance using fresh data. The

procedure for doing so is called back testing and the most popular way of doing so

is using a moving window.

■ The data generating process refers to the mathematical model that represents

future data in function of past and present data. By knowing the data generating

process as a mathematical expression, computer programs that simulate data using

Monte Carlo methods can be implemented and the data generated can be used to

compute statistical quantities that would be difficult or even impossible to compute

mathematically.

process for making decisions regarding asset allocation (i.e., allocation of funds

among the major asset classes) and portfolio construction (i.e., selection of

individual assets within an asset class). In addition, the measurements of portfolio

risk with respect to risk factors that are expected to impact the performance of a

portfolio relative to a benchmark are estimated using financial econometric

techniques.

variables.

the dependent variable) on one (or more) explanatory variables.

variable and the explanatory variables is expressed as a linear equation and hence

is referred to as a linear regression model.

■ when the linear regression model includes only one explanatory variable, the

model is said to be a simple linear regression.

■ The error term, or the residual, in a simple linear regression model measures the

error that is due to the variation in the dependent variable that is not due to the

explanatory variable.

■ The error term is assumed to be normally distributed with zero mean and

constant variance.

■ The parameters of a simple linear regression model are estimated using the

method of ordinary least squares and provides a best linear unbiased estimate of

the parameter.

of-fit of the regression line. This measure, which has a value that ranges from 0 to

1, indicates the percentage of the total sum of squares explained by the explanatory

variable in a simple linear regression.

KEY Points unit3 Multiple Linear Regression

■ A multiple linear regression is a linear regression that has more than one

independent or explanatory variable.

■ There are three assumptions regarding the error terms in a multiple linear

regression:

multiple linear regression model.

■ The three steps involved in designing a multiple linear regression model are

model,

(3) evaluating the quality of the model with respect to the given data (diagnosis of

the model).

■ There are criteria for diagnosing the quality of a model. The tests used involve

statistical tools from inferential statistics. The estimated regression errors play an

important role in these tests and the tests accordingly are based on the three

assumptions about the error terms.

■ The first test is for the statistical significance of the multiple coefficient of

determination, which is the ratio of the sum of squares explained by the regression

and the total sum of squares.

■ If the standard deviation of the regression errors from a proposed model is found

to be too large, the fit could be improved by an alternative specification. Some of

the variance of the errors may be attributable to the variation in some independent

variable not considered in the model.

■ An analysis of variance test is used to test for the statistical significance of the

entire model.

independent variables into the regression, one will not know the true quality of the

model by evaluating the model using the same data. To deal with this problem, the

adjusted goodness-of-fit measure or adjusted R2 is used. This measure takes into

account the number of observations as well as the number of independent

variables.

is used.

Difference between sample regression

an F-test is used.

and population regression line?

A sample is a subset of a population. Usually it is impossible to test an entire

population so tests are done on a sample of that population. These samples can

be selected so that they are representative of the population in which cases the

sample will have weights, strata, and clusters.

But usually people use random samples. So it's not that the line is different, it's

that the line comes from different data. In stats we have formulas that allow a

sample to represent a population, if you have the entire population (again

unlikely), you wouldn't need to use this sample formulas, only the population

formulas.

correlation we can do to find the strength of the variables. but regression helps to fit the

best line

line that measures the slope between dependent and independent variables

statistics?

Whenever you are given a series of data points, you make a linear regression by

estimating a line that comes as close to running through the points as possible. To

maximize the accuracy of this line, it is constructed as a Least Square Regression Line

(LSRL for short). The regression is the difference between the actual y value of a data

point and the y value predicted by your line, and the LSRL minimizes the sum of all the

squares of your regression on the line.

A Correlation is a number between -1 and 1 that indicates how well a straight line

represents a series of points. A value greater than one means it shows a positive slope; a

value less than one, a negative slope. The farther away the correlation is from 0, the less

accurately a straight line describes the data.

What is the difference b/n stochastic error term and residual?

the residual is the difference between the observed Y and the estimated regression

line(Y), while the error term is the difference between the observed Y and the true

regression equation (the expected value of Y). Error term is theoretical concept that can

never be observed, but the residual is a real-world value that is calculated for each

observation every time a regression is run. The reidual can be thought of as an estimate of

the error term, and e could have been denoted as ^e.

Correlation is a measure of the degree of agreement in the changes (variances) in two or

more variables. In the case of two variables, if one of them increases by the same amount

for a unit increase in the other, then the correlation coefficient is +1. If one of them

decreases by the same amount for a unit increase in the other, then the correlation

coefficient is -1. Lesser agreement results in an intermediate value.

It is very important to remember that correlation and regression measure only the linear

relationship between variables. A symmetrical relationshup, for example, y = x2 between

values of x with equal magnitudes (-a < x < a), has a correlation coefficient of 0, and the

regression line will be a horizontal line. Also, a relationship found using correlation or

regression need not be causal.

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Let's say that you fit a simple regression line y = mx + b to a set of (x,y) data points. In a

typical research situation the regression line will not touch all of the points; it might not

touch any of them. The vertical difference between the y-co-ordinate of one of the data

points and the y value of the regression line for the x-co-ordinate of that data point is

called a residual.

population regression line?

A sample is a subset of a population. Usually it is impossible to test an entire

population so tests are done on a sample of that population. These samples can

be selected so that they are representative of the population in which cases the

sample will have weights, strata, and clusters.

But usually people use random samples. So it's not that the line is different, it's

that the line comes from different data. In stats we have formulas that allow a

sample to represent a population, if you have the entire population (again

unlikely), you wouldn't need to use this sample formulas, only the population

formulas.

correlation we can do to find the strength of the variables. but regression helps to fit the

best line

line that measures the slope between dependent and independent variables

statistics?

Whenever you are given a series of data points, you make a linear regression by

estimating a line that comes as close to running through the points as possible. To

maximize the accuracy of this line, it is constructed as a Least Square Regression Line

(LSRL for short). The regression is the difference between the actual y value of a data

point and the y value predicted by your line, and the LSRL minimizes the sum of all the

squares of your regression on the line.

A Correlation is a number between -1 and 1 that indicates how well a straight line

represents a series of points. A value greater than one means it shows a positive slope; a

value less than one, a negative slope. The farther away the correlation is from 0, the less

accurately a straight line describes the data.

What is the difference b/n stochastic error term and residual?

the residual is the difference between the observed Y and the estimated regression

line(Y), while the error term is the difference between the observed Y and the true

regression equation (the expected value of Y). Error term is theoretical concept that can

never be observed, but the residual is a real-world value that is calculated for each

observation every time a regression is run. The reidual can be thought of as an estimate of

the error term, and e could have been denoted as ^e.

Correlation is a measure of the degree of agreement in the changes (variances) in two or

more variables. In the case of two variables, if one of them increases by the same amount

for a unit increase in the other, then the correlation coefficient is +1. If one of them

decreases by the same amount for a unit increase in the other, then the correlation

coefficient is -1. Lesser agreement results in an intermediate value.

It is very important to remember that correlation and regression measure only the linear

relationship between variables. A symmetrical relationshup, for example, y = x2 between

values of x with equal magnitudes (-a < x < a), has a correlation coefficient of 0, and the

regression line will be a horizontal line. Also, a relationship found using correlation or

regression need not be causal.

What does the term residual mean?

Let's say that you fit a simple regression line y = mx + b to a set of (x,y) data points. In a

typical research situation the regression line will not touch all of the points; it might not

touch any of them. The vertical difference between the y-co-ordinate of one of the data

points and the y value of the regression line for the x-co-ordinate of that data point is

called a residual.

population regression line?

A sample is a subset of a population. Usually it is impossible to test an entire

population so tests are done on a sample of that population. These samples can

be selected so that they are representative of the population in which cases the

sample will have weights, strata, and clusters.

But usually people use random samples. So it's not that the line is different, it's

that the line comes from different data. In stats we have formulas that allow a

sample to represent a population, if you have the entire population (again

unlikely), you wouldn't need to use this sample formulas, only the population

formulas.

correlation we can do to find the strength of the variables. but regression helps to fit the

best line

line that measures the slope between dependent and independent variables

statistics?

Whenever you are given a series of data points, you make a linear regression by

estimating a line that comes as close to running through the points as possible. To

maximize the accuracy of this line, it is constructed as a Least Square Regression Line

(LSRL for short). The regression is the difference between the actual y value of a data

point and the y value predicted by your line, and the LSRL minimizes the sum of all the

squares of your regression on the line.

A Correlation is a number between -1 and 1 that indicates how well a straight line

represents a series of points. A value greater than one means it shows a positive slope; a

value less than one, a negative slope. The farther away the correlation is from 0, the less

accurately a straight line describes the data.

What is the difference b/n stochastic error term and residual?

the residual is the difference between the observed Y and the estimated regression

line(Y), while the error term is the difference between the observed Y and the true

regression equation (the expected value of Y). Error term is theoretical concept that can

never be observed, but the residual is a real-world value that is calculated for each

observation every time a regression is run. The reidual can be thought of as an estimate of

the error term, and e could have been denoted as ^e.

Correlation is a measure of the degree of agreement in the changes (variances) in two or

more variables. In the case of two variables, if one of them increases by the same amount

for a unit increase in the other, then the correlation coefficient is +1. If one of them

decreases by the same amount for a unit increase in the other, then the correlation

coefficient is -1. Lesser agreement results in an intermediate value.

Regression involves estimating or quantifying this relationship.

It is very important to remember that correlation and regression measure only the linear

relationship between variables. A symmetrical relationshup, for example, y = x2 between

values of x with equal magnitudes (-a < x < a), has a correlation coefficient of 0, and the

regression line will be a horizontal line. Also, a relationship found using correlation or

regression need not be causal.

What does the term residual mean?

Let's say that you fit a simple regression line y = mx + b to a set of (x,y) data points. In a

typical research situation the regression line will not touch all of the points; it might not

touch any of them. The vertical difference between the y-co-ordinate of one of the data

points and the y value of the regression line for the x-co-ordinate of that data point is

called a residual.

population regression line?

A sample is a subset of a population. Usually it is impossible to test an entire

population so tests are done on a sample of that population. These samples can

be selected so that they are representative of the population in which cases the

sample will have weights, strata, and clusters.

But usually people use random samples. So it's not that the line is different, it's

that the line comes from different data. In stats we have formulas that allow a

sample to represent a population, if you have the entire population (again

unlikely), you wouldn't need to use this sample formulas, only the population

formulas.

correlation we can do to find the strength of the variables. but regression helps to fit the

best line

line that measures the slope between dependent and independent variables

statistics?

Whenever you are given a series of data points, you make a linear regression by

estimating a line that comes as close to running through the points as possible. To

maximize the accuracy of this line, it is constructed as a Least Square Regression Line

(LSRL for short). The regression is the difference between the actual y value of a data

point and the y value predicted by your line, and the LSRL minimizes the sum of all the

squares of your regression on the line.

A Correlation is a number between -1 and 1 that indicates how well a straight line

represents a series of points. A value greater than one means it shows a positive slope; a

value less than one, a negative slope. The farther away the correlation is from 0, the less

accurately a straight line describes the data.

What is the difference b/n stochastic error term and residual?

the residual is the difference between the observed Y and the estimated regression

line(Y), while the error term is the difference between the observed Y and the true

regression equation (the expected value of Y). Error term is theoretical concept that can

never be observed, but the residual is a real-world value that is calculated for each

observation every time a regression is run. The reidual can be thought of as an estimate of

the error term, and e could have been denoted as ^e.

Correlation is a measure of the degree of agreement in the changes (variances) in two or

more variables. In the case of two variables, if one of them increases by the same amount

for a unit increase in the other, then the correlation coefficient is +1. If one of them

decreases by the same amount for a unit increase in the other, then the correlation

coefficient is -1. Lesser agreement results in an intermediate value.

It is very important to remember that correlation and regression measure only the linear

relationship between variables. A symmetrical relationshup, for example, y = x2 between

values of x with equal magnitudes (-a < x < a), has a correlation coefficient of 0, and the

regression line will be a horizontal line. Also, a relationship found using correlation or

regression need not be causal.

What does the term residual mean?

Let's say that you fit a simple regression line y = mx + b to a set of (x,y) data points. In a

typical research situation the regression line will not touch all of the points; it might not

touch any of them. The vertical difference between the y-co-ordinate of one of the data

points and the y value of the regression line for the x-co-ordinate of that data point is

called a residual.

Population Regression Function vs Sample

Regression Function?

1.

2.

But we can Draw one SRF for one sample from that population.

4.

PRF curve or line is the locus of the conditional mean/ expectation of the independent variable Y

for the fixed variable X in a sample data.

SRF shows the estimated relation between dependent variable Y and explanatory variable X in a

sample.

function.

what requirement of regression is violated?

In a regression of a time series that states data as a function of calendar year, what requirement

of regression is violated?

and I need to explain the statistical signifance of the model.

What are the advantages and disadvantage of logistic regression compared with

linear regression analysis?

It all depends on what data set you're working with. There a quite a number of different

regression analysis models that range the gambit of all functions you can think of. Obviously

some are more useful than others. Logistic regression is extremely useful for population

modelling because population growth follows a logistic curve. The final goal for any regression

analysis is to have a mathematical function that most closely fits your data, so advantages and

disadvantages depend entirely upon that.

Regression analysis is based on the assumption that the dependent variable is distributed

according some function of the independent variables together with independent identically

distributed random errors. If the error terms were not stochastic then some of the properties of

the regression analysis are not valid.

To take a simple case, let's suppose you have a set of pairs (x1, y1), (x2, y2), ... (xn, yn). You have

obtained these by choosing the x values and then observing the corresponding y values

experimentally. This set of pairs would be called a sample.

For whatever reason, you assume that the y's and related to the x's by some function f(.), whose

parameters are, say, a1, a2, ... . In far the most frequent case, the y's will be assumed to be a

simple linear function of the x's: y = f(x) = a + bx.

Since you have observed the y's experimentally they will almost always be subject to some error.

Therefore, you apply some statistical method for obtaining an estimate of f(.) using the sample of

pairs that you have.

This estimate can be called the sample regression function. (The theoretical or 'true' function f(.)

would simply be called the regression function, because it does not depend on the sample.)

Not a function because it should not map one value to many (eg square root).

Not the regression coefficient since for an even function it would be 0.

expressed as a function of other why do you need both?

The F-ratio can be expressed as a function of the R^2 only under certain assumptions (e.g. linear

regression model). There are econometric models where the R^2 is not meaningfully defined or

the F-ratio cannot be expressed in terms of the R^2, but you can still carry out an F-test, .

What are some examples where the mean the median and the mode might be the

same?

The answer above displays a sample in which the sample mean, sample median and sample

mode assume the same value.

If you were asking about populations, then the population mean, population median and

population mode are the same whenever the probability density function for the population is

symmetric. For example, the normal probability density function is symmetric, the t and uniform

density functions are symmetric. Many are.

Is it possible for a function that has a horizontal asymptote to attain the value of

an asymptote?

Yes.

Think of a function that starts at the origin, increases rapidly at first and then decays gradually to

an asymptotic value of 0. It will have attained its asymptotic value at the start.

For example, the Fisher F distribution, which is often used, in statistics, to test the significance of

regression coefficients. Follow the link for more on the F distribution.

Here's how you do it in Excel: use the function =STDEV(<range with data>). That function

calculates standard deviation for a sample.

Mean is the sum of several values of the same type (x1, x2,..., xN ) divided by the number of

values.

Mean = (x1 + x2 + ... xN ) /N

The Least square method is used when doing a regression of a cloud of point { (x1,y1), (x2,y2)

etc. } by a function (linear, parabolic hyperbolic etc.). With this special algorithm we get the

closest function f (x) to approximated the cloud of point.

f(x, Beta) ~ y

Beta = (XTX)-1XT Y = coefficients of the regression

The points must be in 2 dimensions, because the methods needs to derivate the function f.

I think that the least square mean is not the proper term because you have a function f ... What is

the mean of f (x) = a *x + b ??? See.

The difference between multicollinearity and auto correlation is that multicollinearity is a linear

relationship between 2 or more explanatory variables in a multiple regression while while auto-

correlation is a type of correlation between values of a process at different points in time, as a

function of the two times or of the time difference.

For Classical Regression Model the OLS or Ordinary Least Squares - estimators (or the betas)

are BLUE (Best, Linear, Unbiased, Estimator) when :

1. The regression is linear in the coefficients, it is correctly specified and has an additive

error term.

2. Mean of the error term is zero. (Include a constant term in the regression (B0 which will

force the mean to be zero)

3. The independent variables are not correlated with the error term. (If they are correlated

then the betas will be biased.)

4. Observations of the error term (the residuals) are not correlated with each other.

5. The error term has a constant variance (Homoskedasticity)

6. No independent variable is a perfect linear function of any of the other independent

variable. (If this is true - multicollinearity will occur)

I will assume that you are asking about probability distribution functions. There are two types:

discrete and continuous. Some might argue that a third type exists, which is a mix of discrete and

continuous distributions.

When representing discrete random variables, the probability distribution is probability mass

function or "pmf." For continuous distributions, the theoretical distribution is the probability

density function or "pdf."

Some textbooks will call pmf's as discrete probability distributions.

Common pmf's are binomial, multinomial, uniform discrete and Poisson.

Common pdf's are the uniform, normal, log-normal, and exponential.

Two common pdf's used in sample size, hypothesis testing and confidence intervals are the "t

distribution" and the chi-square. Finally, the F distribution is used in more advanced hypothesis

testing and regression.

likelihood function?

Cox model applies to observations in time (i.e. processes, or functions of t). The true likelihood

for that function would be a function of (functions of t), obtained by expressing the probability in

a space of (functions of t) as

[density]*[reference measure on (functions of t)]

The factor [density] would be the true likelihood.

The partial likelihood is a factor of [density] involving only the parameters of interest:

[density] = [partial likelihood]*[....]

There is no point in working with the full likelihood, in the sense that the nice properties of the

MLE apply to parameters from a finite dimensional space, and would not automatically apply to

the full likelihood in the space of (functiosn of t).

That is why, for example, one needs to rework the large sample theory of estimators based on

partial likelihood.

2. numerical value or function: a numerical value or function, e.g. a mean or standard deviation,

used to describe a sample or population

3. piece of information: somebody or something treated as a piece of data or information.

I've included links to both these terms. Definitions from these links are given below. Correlation

and regression are frequently misunderstood terms. Correlation suggests or indicates that a linear

relationship may exist between two random variables, but does not indicate whether X causes

Yor Y causes X. In regression, we make the assumption that X as the independent variable can

be related to Y, the dependent variable and that an equation of this relationship is useful.

Definitions from Wikipedia: In probability theory and statistics, correlation (often measured as

a correlation coefficient) indicates the strength and direction of a linear relationship between

two random variables. In statistics, regression analysis refers to techniques for the modeling and

analysis of numerical data consisting of values of a dependent variable (also called a response

variable) and of one or more independent variables (also known as explanatory variables or

predictors). The dependent variable in the regression equation is modeled as a function of the

independent variables, corresponding parameters ("constants"), and an error term. The error term

is treated as a random variable. It represents unexplained variation in the dependent variable.

The parameters are estimated so as to give a "best fit" of the data. Most commonly the best fit is

evaluated by using the least squares method, but other criteria have also been used.

Given any sample size there are many samples of that size that can be drawn from the

population. In the population is N and the sample size in n, then there are NCn, but remember that

the population can be infinite.

A test statistic is a value that is calculated from only the observations in a sample (no unknown

parameters are estimated). The value of the test statistic will change from sample to sample. The

sampling distribution of a test statistic is the probability distribution function for all the values

that the test statistic can take across all possible samples.

The line of best fit is found by statistical calculations which this site is too crude for. Look up

least squares regression equation if you really wish to follow up. The slope of a graph is the

slope of the tangent to the graph curve at the point in question. If the function of the graph is y =

f(x) then this is the limit, as dx tends to 0, of [f(x + dx) - f(x)]/dx.

A random variable is a function that assigns unique numerical values to all possible outcomes of

a random experiment.

A real valued function defined on a sample space of an experiment is also called random

variable.

The parent function of the exponential function is ax

a function is a added to the iverse function and multiply the SQURED AND CUBIC OR ethc......

Logarithmic Function

A reduced chi-square value, calculated after a nonlinear regression has been performed, is the is

the Chi-Square value divided by the degrees of freedom (DOF). The degrees of freedom in this

case is N-P, where N is the number of data points and P is the number of parameters in the fitting

function that has been used. I have added a link, which explains better the advantages of

calculating the reduced chi-square in assessing the goodness of fit of a non-linear regression

equation. In fitting an equation to the data, it is possible to also "over fit", which is to account for

small and random errors in the data, with additional parameters. The reduced chi-square value

will increase (show a worse fit) if the addition of a parameter does not significantly improve the

fit. You can also do a search on reduced chi-square value to better understand its importance.

How does the graph of the Mandelbrot set function relate to composite

functions?

The Mandelbrot graph is generated iteratively and so is a function of a function of a function ...

and in that sense it is a composite function.

A formula or graph are two ways to describe a math function. How a math function is described

depends on the domain of the function or the complexity of the function.

No, an function only contains a certain amount of vertices; leaving a logarithmic function to

NOT be the inverse of an exponential function.

exponential function to a logarithmic function, change the subject of the function from one

variable to the other.

Often it is that the two means are the same. But more generally, it is that some function of the

two means is zero.

f(x)=x+3 is function notation. The answer is a function of what x is.

f(g(x))= the answer the inside function substituted in the outside function.

Function of calorimeter?

WHAT IS THE FUNCTION OF CALORIMETER?

Its function is to temperate the heat of an object.

Is A function with a graph that is symmetric about the origin an even function?

An even function is symmetric about the y-axis. If a function is symmetric about the origin, it is

odd.

exponential function?

That is not a function, although it does involve the function of addition. A function is something

that is done to numbers.

Yes, the sine function is a periodic function. It has a period of 2 pi radians or 360 degrees.

Zero order hold is used in Digital - Analogue converters (DACs). It literally holds the digital

signal for the sample time, then moves to the next digital sample and holds that signal for the

If the function is Output = 3 x Input, the function will return 36.6.

Similarly, if the function is Output = 3 + Input, the function will return 15.2.

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