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Name: AISHA TAHIR

MPhil econometric
Roll no#14
Estimate “beta” through matrix
 Suppose b and d is named 100 x 10 and 10 x 100 matrices.
 Than we can make 10×10 matrix of X’X
 Select all variables(c, x1,x2……x10) select and define the name “b” than
take transpose of b. =transpose(b).resultant values of transpose appears,
select again this resultant values and assign them name “d”.
 =MMULT (d, b) commands makes matrix of X’X.

X’X=

100 -3.33328 -11.3779 -1.25273 1.138864 -7.97929 -0.75037 0.665373 10.66251 16.74595
-3.33328 90.94375 -10.5634 0.726265 -1.30186 -13.0691 9.526597 14.68147 3.981088 -1.28159
-11.3779 -10.5634 105.7214 13.32969 16.56563 6.573198 14.79826 -12.9487 0.120828 -13.2226
-1.25273 0.726265 13.32969 84.59039 8.856702 -8.55443 2.145738 -8.22381 3.005415 -15.3431
1.138864 -1.30186 16.56563 8.856702 105.8624 -0.2852 2.402047 23.58595 -2.39866 3.345813
-7.97929 -13.0691 6.573198 -8.55443 -0.2852 88.07109 9.158056 -3.46579 -0.24855 3.049963
-0.75037 9.526597 14.79826 2.145738 2.402047 9.158056 89.91046 -2.30923 7.454656 0.329972
0.665373 14.68147 -12.9487 -8.22381 23.58595 -3.46579 -2.30923 92.24613 -1.83993 -4.89181
10.66251 3.981088 0.120828 3.005415 -2.39866 -0.24855 7.454656 -1.83993 63.19044 3.218241
16.74595 -1.28159 -13.2226 -15.3431 3.345813 3.049963 0.329972 -4.89181 3.218241 76.11668

(10 ×10)

 So in order to make (X’X)-1 we need inverse of above matrix by using


command of =MInverse (x’x).
(X’X) -1 =
0.010772 0.000737 0.00094 -0.00022 -0.00017 0.001068 -9.4E-05 -0.00015 -0.00174 -0.00221
0.000737 0.011925 0.001123 -0.00024 0.000423 0.001824 -0.00162 -0.00186 -0.00071 1.08E-05
0.00094 0.001123 0.01082 -0.001 -0.00202 -0.00047 -0.00172 0.00179 -0.00011 0.001725
-0.00022 -0.00024 -0.001 0.012901 -0.00136 0.00125 -0.00012 0.001567 -0.00068 0.002611
-0.00017 0.000423 -0.00202 -0.00136 0.010663 2.72E-05 -8.5E-05 -0.00326 0.000455 -0.00128
0.001068 0.001824 -0.00047 0.00125 2.72E-05 0.012041 -0.00135 0.00013 -0.00012 -0.0005
-9.4E-05 -0.00162 -0.00172 -0.00012 -8.5E-05 -0.00135 0.01183 0.000236 -0.00126 -0.00026
-0.00015 -0.00186 0.00179 0.001567 -0.00326 0.00013 0.000236 0.012459 0.000198 0.001559
-0.00174 -0.00071 -0.00011 -0.00068 0.000455 -0.00012 -0.00126 0.000198 0.016391 -0.00048
-0.00221 1.08E-05 0.001725 0.002611 -0.00128 -0.0005 -0.00026 0.001559 -0.00048 0.014648

(10×10)
Name: AISHA TAHIR
MPhil econometric
Roll no#14
 In order to generate matrix of x’y we apply same matrix multiplication
procedure as apply above.

X’y=
-3.31525
-11.2015
11.86919
-2.72849
-21.1142
4.608987
-2.01335
-7.33556
-2.32616
7.259011
(10×1)

 Β=(x’x) -1 (x’y)
b1 -0.03446
b2 -0.10392
b3 0.159145
b4 0.000185
b5 -0.23579
b6 0.020369
b7 -0.03045
b8 0.026706
b9 -0.03649
b10 0.141821

Variance covariance matrix

Variance and covariance are often displayed together in a variance-covariance matrix, (aka, a
covariance matrix). The variances appear along the diagonal and covariances appear in the off-
diagonal elements, as shown below.

V    =    Σ x12 / N     Σ x1 x2 / N     . . .     Σ x1 xc / N


Σ x2 x1 / N     Σ x22 / N     . . .     Σ x2 xc / N
. . .     . . .     . . .     . . .
Σ xc x1 / N     Σ xc x2 / N     . . .     Σ xc2 / N

where
Name: AISHA TAHIR
MPhil econometric
Roll no#14
V is a c x c variance-covariance matrix
N is the number of scores in each of the c data sets
xi is a deviation score from the ith data set
Σ xi2 / N is the variance of elements from the ith data set
Σ xi xj / N is the covariance for elements from the ith and jth data sets

Var /cov matrix

-0.09664 -0.00661 -0.00843 0.001986 0.001485 -0.00958 0.000841 0.001386 0.015595 0.01983
-0.00661 -0.10699 -0.01007 0.002162 -0.0038 -0.01636 0.014559 0.016695 0.006337 -9.7E-05
-0.00843 -0.01007 -0.09708 0.008989 0.018158 0.004223 0.015404 -0.01606 0.001025 -0.01548
0.001986 0.002162 0.008989 -0.11574 0.012237 -0.01121 0.001105 -0.01406 0.00609 -0.02342
0.001485 -0.0038 0.018158 0.012237 -0.09566 -0.00024 0.000762 0.029231 -0.00408 0.011493
-0.00958 -0.01636 0.004223 -0.01121 -0.00024 -0.10803 0.012102 -0.00117 0.001049 0.004474
0.000841 0.014559 0.015404 0.001105 0.000762 0.012102 -0.10613 -0.00211 0.011278 0.002288
0.001386 0.016695 -0.01606 -0.01406 0.029231 -0.00117 -0.00211 -0.11178 -0.00177 -0.01399
0.015595 0.006337 0.001025 0.00609 -0.00408 0.001049 0.011278 -0.00177 -0.14705 0.004273
0.01983 -9.7E-05 -0.01548 -0.02342 0.011493 0.004474 0.002288 -0.01399 0.004273 -0.13142

Covariance

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10Column 11
Column 1 0
Column 2 0 0.908326
Column 3 0 -0.10943 1.044268
Column 4 0 0.006845 0.131872 0.845747
Column 5 0 -0.01264 0.166952 0.08871 1.058494
Column 6 0 -0.13335 0.056653 -0.08654 -0.00194 0.874344
Column 7 0 0.095016 0.147129 0.021363 0.024106 0.090982 0.899048
Column 8 0 0.147036 -0.12873 -0.08215 0.235784 -0.03413 -0.02304 0.922417
Column 9 0 0.043365 0.01334 0.03139 -0.0252 0.006022 0.075347 -0.01911 0.620535
Column 10 0 -0.00723 -0.11317 -0.15133 0.031551 0.043862 0.004556 -0.05003 0.014327 0.733124
Column 11 0 0.109554 0.02737 -0.01849 -0.03216 -0.10465 -0.02035 0.143066 -0.08261 -0.08728 1.0787
Name: AISHA TAHIR
MPhil econometric
Roll no#14
Hypothesis testing

 H o=b2=0

Hi =b2#0

Two tailed test

P-value (the probability value) is the value p of the statistic used to test the null
hypothesis. If p < α then we reject the null hypothesis.

P value 0.136268>5% so we do not reject ho.

 Ho: B5=b6
 H1:b5#b6

Null hypothesis state that variable x5 and x6 has no role in dependent variable.

Unrestricted model anova table.


ANOVA
df SS MS F Significance F
Regression 10 10.48768 1.048768 0.92011 0.518685
Residual 89 101.4448 1.139829
Total 99 111.9325

Restricted model anova table


ANOVA
df SS MS F Significance F
Regression 8 10.39727 1.299659 1.164808 0.329052
Residual 91 101.5352 1.115771
Total 99 111.9325
Name: AISHA TAHIR
MPhil econometric
Roll no#14

F= (101.535-101.444)/2

(101.444)/100-10

0.045/1.127=0.03<4

Do not reject ho, x5 and x6 has no role in predicting Y.

 Ho=b2+b3+b4=0
 Hi = Ho not true

Restricted model contains three restrictions.

Restricted ANOVA TEST


ANOVA
df SS MS F Significance F
Regression 7 3.514742 0.502106 0.426072 0.883695
Residual 92 108.4177 1.178453
Total 99 111.9325

Unrestricted ANOVA TABLE:


ANOVA
df SS MS F Significance F
Regression 10 10.48768 1.048768 0.92011 0.518685
Residual 89 101.4448 1.139829
Total 99 111.9325
Name: AISHA TAHIR
MPhil econometric
Roll no#14
F= (108.417-101.444)/3

101.444/90

2.324/1.127=2.06<4

Do not reject ho.

 Ho b2=0, b1+b2=0,b3=1

T =bhat/s.e(b) =0.167/0.111=1.50<2

Do not reject ho.

T=b1-b2

Var(b1)+var(b2)-2cov(b1,b2)
-0.0927-0.16734

0.117031+0.111305-2(-0.10)

-0.3<2

Do not reject ho.

Ho= b3=1

H1=ho is not true

T=β3^/se(β3)

-0.0036/0.121311

-0.02<2 do not reject ho.


Name: AISHA TAHIR
MPhil econometric
Roll no#14

Distribution
Histogram
20
10
Frequency

0
2 8 5 5 e 9 Frequency
7 5 6 1 or 17
6 91 1 51
4 6 21 88 M 9 6
8 06 4 00 6 03 3 19 0 09
5 7 1 6 . 0
1. 4. 3. 0.
Bin

ᵡ2

T-distribution

Histogram
12
6
Frequency

0
7 6 6 5 6 e Frequency
2 9 6 6 9 or
5 01 1 75 8 50 4 74 7 99 M
4 19 3 42 2 64 8 1 2 8 89
.2 .1 .0 0.
0
0.
1
-0 -0 -0
Bin

F-distribution
Name: AISHA TAHIR
MPhil econometric
Roll no#14

Histogram
40
30
Frequency

20 Frequency
10
0
1 1 1 1 1 More
Bin

The end

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