# Econometrics

## Endogenous co-regressor… Not what you think!

In classic econometrics textbooks and classes, we often associate endogeneity to the correlation or relationship with the error term from a regressor. This is correct and fully agreed upon across authors and professors. But there’s some kind of new endogenous behavior that may not be correlated with the error/residual only, and it may be a …

## Modeling Asset Prices with Geometric Brownian Motion in Python

One landmark theorem in Financial Economics is the Efficient Market Hypothesis (EMH). This theorem posits that in an arbitrage-free market, we can model an asset’s present price as the discounted expected future price: We can take the natural logarithm to show that the natural logarithm of asset prices follows a random walk – the best …

## Threat to validity of regression analysis – Omitted Variables Bias

Most of the readers of this blog would be familiar with ordinary least squares estimator and regression models. Let us talk about one source that can cause these estimates and models to be biased and inconsistent. This is especially important when we think about the causal relationship of interest or the relationship which being studied. … ## The black box and econometrics.

Some of the most popular models used in Data Analysis imply the use of the so-called “Black Box” approach. Regarding the simplest interpretation one can give in this context, it depends on the inputs and outputs that a certain model can deliver in terms of prediction power. If econometrics is thought to estimate population parameters, …

## Estimating long-run coefficients from an ARDL model

Whether if we’re working with Time Series Data or Panel Data, most of the times we want to follow the analysis of the long-run behavior and the short-run dynamics. An interesting but well-known model that enable us for such approach is the Auto-Regressive Distributed Lag model which stands as ARDL. There are a lot of …

## Panel Data Nonlinear Simultaneous Equation Models with Two-Stage Least Squares using Stata

In this article, we will follow Woolridge (2002) procedure to estimate a set of equations with nonlinear functional forms for panel data using the two-stage least squares estimator. It has to be mentioned that this topic is quite uncommon and not used a lot in applied econometrics, this is due that instrumenting the nonlinear terms …

## Wooldridge Serial Correlation Test for Panel Data using Stata.

In this article, we will follow Drukker (2003) procedure to derive the first-order serial correlation test proposed by Jeff Wooldridge (2002) for panel data. It has to be mentioned that this test is considered a robust test, since works with lesser assumptions on the behavior of the heterogeneous individual effects. We start with the linear …

## Modeling COVID 19 Using Dynamic Equations

Watch a part of the live DSGE training organized by M&S Research Hub, for more information and videos visit https://ms-researchhub.com/home/training/gem-training.html