Econometrics - Hypothesis Testing

7 important questions on Econometrics - Hypothesis Testing

How can we estimate variance  in homo skedasticity?

s^2=1/n-k-1 sum ûi^2

How to calculate the t statistic?

ta/2,n-k-1

What is often te rule of thumb to reject a H0?

Reject if |t|>2
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When is a coefficient statistically significant?

Regression coefficient different from zero

When are two models nested?

Two models containing overlapping variables

How to choose between two nested models?

  1. Choose model with lowest AIC. It penalizes overly large models
  2. Choose model with lowest BIC, same as AIC but will have bigger penalty term for n>=8
  3. Critical thinking

Is an OLS unbiased under heterskedasticity?

Yes

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