A Regression User’s Handbook
Studenmund Chapter 11
11.1 A Regression User’s Checklist
(pp. 391-392)
11.2 A Regression User’s Guide (Table 11.2)

For each econometric problem, understand
•
•
•
•
Its nature
Its consequences for OLS estimation
How to detect it
How to attempt to get rid of it
– For example, both multicollinearity and irrelevant variables
can cause regression coefficients to have insignificant tstatistics
11.3 Running Your Own Regression Report

“Econometrics is best learned by doing, not by
reading books, listening to lectures, or taking
tests.”

“Get your hands dirty”
Running your own regression project …
1.
2.
3.
Choosing a topic
Applying the 6 steps in regression analysis
Writing your research report
6 Steps of Regression Analysis (p.64)Ch.3
1.
2.
3.
4.
5.
6.
Review the literature & develop the theoretical
model.
Specify the model: Select the independent variables
& the functional function.
Hypothesize the expected signs of the coefficients.
Collect the data.
Estimate & evaluate the equation.
Document the results.
Common Elements in a Research Report
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
An abstract (executive summary, >100 words)
A brief introduction of the dependent variable and states the
research goal.
A short review of the relevant literature.
An explanation of the model specification.
A description of the data & data sources.
A presentation of each estimated specification.
A detailed analysis of the regression results, including any
econometric problems encountered.
A short conclusion that includes any policy implications or
recommendations.
A reference section.
An appendix for tables that report regression results.
11.5 The Ethical Econometrican
Nothing could be further from the truth!
Principle: spend plenty of time to develop the theoretical
underpinning and little time to “pursue” alternative
estimations of that model.
Reality: rare for a first attempt at estimation to be totally
problem free.
We are tempted to continue running regressions until you
likes the way the result looks.
Recommendation: report alternative estimated equations
Can you handle the truth????
Q:? Why is there a Nobel Prize for economics and none for
other social sciences?
A:? They already have one in literature.
Three econometricians went out hunting, and came across a
large deer. The first econometrician fired, but missed, by a
meter to the left. The second econometrician fired, but also
missed, by a meter to the right. The third econometrician didn't
fire, but shouted in triumph, "We got it! We got it!"
More Jokes @ faculty.tamucc.edu/jlee/4310
Top 10 Reasons to Learn Econometrics
Good Luck!!
Ch. 6 – Model Specification
Incorrect Specification
 Results: Explanatory variables correlated
with errors
 Check: stepwise regression
Bias
Variance
Omitted variables
yes
yes
Irrelevant
variables
no
yes
Ch.7 -- Functional form

To improve fit
– curve
– dummy variables
– lagged independent variables
Ch. 8 -- Multicollinearity

Check: VIF
Bias
Variance
No
yes
Ch 9 – Serial correlation

Result: errors not random
 Check: DW statistics
 Remedy: GLS
Bias
Variance
No
yes
Ch. 10 – Heteroskedasticity

Result: variance not constant
 Check: Park or White Test
 Remedy: WLS or HAC
Bias
Variance
No
yes
Term Paper






Due: December 11, 12:00 Noon
Format: Double-spaced contents; cover page includes an
abstract of 150 words or less.
Send your paper via email to jim.lee@tamucc.edu and
attach a Word file with a file name:
ECON4310_LastName.doc, where LastName is your Last
Name.
Please DO NOT SEND a file with a docx file extension (Vista
format or newer).
You will receive acknowledgement of receipt by the end of
that day; otherwise, that means I will not have received your
email.
Your paper may be screened at Turnitin.
What else?

Economic Scholars Program
– Presentation on March 27, 2009
– At the Dallas Fed
– College will most likely pay for your
travel costs & expenses
– Details: dallasfed.org/educate/events/2009/09esp.cfm