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(4)
0.422690 is standard error of 0.155798. Standard error measures how reliable the
coefficient 0.155798 is. you can perform hypothesis test for 0.155798 and confidence
interval with this value later. (The smaller the better)
(5)
0.368588 is t-Stattistic for coefficient 0.155798
If you divide coefficient by its standard error you will get its t-statistic.
0.155798/0.422690=0.368588. So 0.368588 is the t-Stattistics for 0.155798
T statistics tells us whether coefficient is significant or not. If absolute t-statistics (without
positive or negative sign) is greater than the critical value of T distribution then coefficient is
significant. Insignificant otherwise. For instance, t-critical value for 41 observations and two
parameters is 1.685 . since 0.368588 is not greater than 1.685 the coefficient 0.155798 is
not significant. However, for now you don’t need to perform tests using t-statistics
because Eviews calculates P-values for you which is easier to calculate the
significance .
(6)
0.7144 is P-value of t-Statistics
It tells us whether the coefficient is significant or not. It is easier than the (5) If P-value is
0.01 or smaller than 0.01 then, coefficient is significant at 1% level meaning that the
estimated coefficient is very strongly significant. And if it is 0.05 or smaller than 0.05 than
the coefficient is also strongly significant at 5% level. If it is 0.10 or smaller, then, the
coefficient is significant but not so strong as previous two. In the table P-value is 0.7144
which means that the of 0.155798 is not significant.
(7)
X is independent variable, the variable whose effect on Y you want to test
(8)
The coefficient for the independent variable. It is the most important part of this table. It tells
us how much the dependent variable change if the X change 1 unit. The estimated value
1.025555 means that if X increase by 1 unit the Y increases by 1.025555 unit and if X
decreases by 1 unit the Y decreases by 1.025555 unit. Please note, the coefficient is
positive it means the relation between X and Y is positive or X has a positive effect on Y . If
you find a negative value then it means they have a negative relation or X has negative
impact on Y.
(9) standard error for 1.025555. same explanation as (4)
(10) T-statistics for 1.025555. same explanation as (5)
(11) P-value of T-statistics (1.025555) same explanation as (6)
note, here P-value is 0.0000 this is smaller than 0.01. it implies that the the coefficient
1.025555 is strongly significant (at 1% significant level). Now you can say variable X
significantly affects Y, or Variable X has a statistically significant effect on Y.
(12) R-squared :
It is always between 0 and 1 and generally positive. It tells you how much successful
your model is in predicting . A higher R-square is better. In very poor model R square
is close to zero like 0.03 etc. R-squared is found to be 0.79193. it implies that about 79%
of changes in Y are explained by the changes in independent variable X.
(13) Adjusted r square :
It is always equal to or smaller than the R-squared. It does the same job as R-squared
does, measuring how much good your model is in predicting. But it has a Specialty , that is,
if you add more variable even irrelevant variable R squre incresase but adjusted r squae
doesn’t. Therefore adjusted R square is kind of smarter than the R square ;)
The higher the adjusted r square (close to 1) the better the model. Sometimes in a
very poor model adjusted R-square become negative . A negative r square is considered
as zero r square .
(14) and (14) S.E. of regression and Sum squared resid. :
Both measure how much the estimated Y differ from actual Y ( actual Ys are the value of Y
in Y series of your data file). Of course, you know, it is not good if they differ too far from
each other. A smaller S.E. of regression and a smaller Sum squared resid are the
better for any model.
Note: S.E. of regression is calculated by dividing the Sum squared resid with df hence, In
a regression with very large number of observation S.E. of regression become very small.
(15) Log likelihood:
It is useful when you compare two nested models. You’ll always find this value negative. a
higher value is better for example -40 is better than -90. A negative value but closer to zero
indicates a best fitting model. And you will choose a model from two models that has a
higher log-likelihood.
(16) F-statistic :
It is used for testing the overall significance of a model specially in a model where
independent variables are more than one. Do all the independent variables in the model
significantly affect the dependent variable ? F-statistics will answer this question. If F-
statistics is greater than the F-critical then you can say that all the variables are significant .
(the F-critical values are available in last pages of Econometrics and Statistics books)
(17) Prob(F-statistic):
However you don’t need to check F-statistic and F-critical value. By looking to the Prob(F-
statistic) you can easily check overall significance of all independent variables. If the
Prob(F-statistic) is equal or smaller than 0.01 you can say that all the variables jointly in the
model significantly affect dependent variable at 1% significance level. If it is equal or
smaller than 0.05 you can say that all the variables jointly in the model significantly affect
the dependent variable at 5% significance level. And if it is equal to or smaller than 0.10 this
time you can say that all the variables jointly in the model are significantly affect
dependent variable at 10% significance level.
Important Note !
The purpose of this post is to give the basic idea about the results of a simple regression
model computed by Econometric software. (I have used Eviews). So, some of my
comments about some results are too straightforward. For example a ''higher R-square is
better'' does not make sense if you are dealing with non-stationary variables.