Tut8 model selection

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Explains issues of model selection for your econometric model

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Tut8 model selection

  1. 1. ECON321 Economic Analysis Tutorial 8 Model selection
  2. 2. Introduction <ul><li>When you estimate multiple regression models the issues of over-fitting or under-fitting the model become important. Remember: </li></ul><ul><ul><li>Start with the theory. </li></ul></ul><ul><ul><li>Draw on your experience. </li></ul></ul><ul><ul><li>Check what others have done. </li></ul></ul><ul><ul><li>Estimate the model and evaluate the results. </li></ul></ul><ul><ul><ul><li>Look at the signs of the coefficients, the t-ratios, R 2 and adjusted R 2 . </li></ul></ul></ul><ul><ul><li>Use the F -test to decide between restricted and unrestricted models. </li></ul></ul>
  3. 3. Introduction <ul><li>This tutorial demonstrates the use of the Ramsey RESET test of model specification. </li></ul><ul><li>This is a general test to detect functional form misspecification. </li></ul><ul><li>And we use another version of the house price data to demonstrate how it can help you to choose between a level-level or log-log model. </li></ul>
  4. 15. <ul><li>Now that you know how to test the model specification, the following tutorial will show you how to test for multicollinearity. </li></ul><ul><li>Save your workfile and continue… </li></ul>

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