Econometrics Practice Questions

Econometrics is the application of statistical and mathematical methods to economic data in order to give empirical content to economic relationships.

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A regression model is a statistical technique used to estimate the relationships among variables, typically involving a dependent variable and one or more independent variables.

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The purpose of the OLS method is to estimate the parameters of a linear regression model by minimizing the sum of the squared differences between the observed values and the values predicted by the model.

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Multicollinearity occurs when two or more independent variables in a regression model are highly correlated, making it difficult to isolate the individual effect of each variable.

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Heteroskedasticity refers to the circumstance in which the variance of the errors in a regression model is not constant across observations.

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Autocorrelation occurs when the residuals (errors) in a regression model are correlated with each other, which violates the assumption of independence.

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A dummy variable is a numerical variable used in regression analysis to represent subgroups of the sample in your study. It takes the value 0 or 1 to indicate the absence or presence of some categorical effect.

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The Gauss-Markov theorem states that, under certain conditions, the OLS estimator is the Best Linear Unbiased Estimator (BLUE) of the coefficients in a linear regression model.

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