Econometrics

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 …

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The Rise of Behavioral Econometrics..

The lessons from behavioral economics have ameliorated social wellbeing and economic success in recent years. Academics and policymakers now recognize that integrating how individuals behave and make decisions in real-life dramatically improves the effectiveness of public policies and the validity of simple theoretical models. Thus, this area of research has enhanced our understanding of the …

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Investigating Non-linear relationships with curvefit using Stata

While modelling specific phenomenon’s in economics, sometimes we might encounter a functional form which may not be linear in the explanatory variables. Assuming, that we still have linearity in the estimators, we have the capability to include in the regression, variables with powers. As an example, consider the following model: The last equation presents the …

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Box-Pierce Test of autocorrelation in Panel Data using Stata.

The test of Box & Pierce was derived from the article “Distribution of Residual Autocorrelations in Autoregressive-Integrated Moving Average Time Series Models” in the Journal of the American Statistical Association (Box & Pierce, 1970). The approach is used to test first-order serial correlation, the general form of the test is given the statistic as: Where …

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