1、Economics 20 - Prof. Anderson,1,Multiple Regression Analysis,y = b0 + b1x1 + b2x2 + . . . bkxk + u 3. Asymptotic Properties,Economics 20 - Prof. Anderson,2,Consistency,Under the Gauss-Markov assumptions OLS is BLUE, but in other cases it wont always be possible to find unbiased estimators In those c
2、ases, we may settle for estimators that are consistent, meaning as n , the distribution of the estimator collapses to the parameter value,Economics 20 - Prof. Anderson,3,Sampling Distributions as n ,b1,n1,n2,n3,n1 n2 n3,Economics 20 - Prof. Anderson,4,Consistency of OLS,Under the Gauss-Markov assump
3、tions, the OLS estimator is consistent (and unbiased) Consistency can be proved for the simple regression case in a manner similar to the proof of unbiasedness Will need to take probability limit (plim) to establish consistency,Economics 20 - Prof. Anderson,5,Proving Consistency,Economics 20 - Prof.
4、 Anderson,6,A Weaker Assumption,For unbiasedness, we assumed a zero conditional mean E(u|x1, x2,xk) = 0 For consistency, we can have the weaker assumption of zero mean and zero correlation E(u) = 0 and Cov(xj,u) = 0, for j = 1, 2, , k Without this assumption, OLS will be biased and inconsistent!,Eco
5、nomics 20 - Prof. Anderson,7,Deriving the Inconsistency,Just as we could derive the omitted variable bias earlier, now we want to think about the inconsistency, or asymptotic bias, in this case,Economics 20 - Prof. Anderson,8,Asymptotic Bias (cont),So, thinking about the direction of the asymptotic
6、bias is just like thinking about the direction of bias for an omitted variable Main difference is that asymptotic bias uses the population variance and covariance, while bias uses the sample counterparts Remember, inconsistency is a large sample problem it doesnt go away as add data,Economics 20 - P
7、rof. Anderson,9,Large Sample Inference,Recall that under the CLM assumptions, the sampling distributions are normal, so we could derive t and F distributions for testing This exact normality was due to assuming the population error distribution was normal This assumption of normal errors implied tha
8、t the distribution of y, given the xs, was normal as well,Economics 20 - Prof. Anderson,10,Large Sample Inference (cont),Easy to come up with examples for which this exact normality assumption will fail Any clearly skewed variable, like wages, arrests, savings, etc. cant be normal, since a normal di
9、stribution is symmetric Normality assumption not needed to conclude OLS is BLUE, only for inference,Economics 20 - Prof. Anderson,11,Central Limit Theorem,Based on the central limit theorem, we can show that OLS estimators are asymptotically normal Asymptotic Normality implies that P(Zz)F(z) as n ,
10、or P(Zz) F(z) The central limit theorem states that the standardized average of any population with mean m and variance s2 is asymptotically N(0,1), or,Economics 20 - Prof. Anderson,12,Asymptotic Normality,Economics 20 - Prof. Anderson,13,Asymptotic Normality (cont),Because the t distribution approa
11、ches the normal distribution for large df, we can also say that,Note that while we no longer need to assume normality with a large sample, we do still need homoskedasticity,Economics 20 - Prof. Anderson,14,Asymptotic Standard Errors,If u is not normally distributed, we sometimes will refer to the st
12、andard error as an asymptotic standard error, since,So, we can expect standard errors to shrink at a rate proportional to the inverse of n,Economics 20 - Prof. Anderson,15,Lagrange Multiplier statistic,Once we are using large samples and relying on asymptotic normality for inference, we can use more
13、 that t and F stats The Lagrange multiplier or LM statistic is an alternative for testing multiple exclusion restrictions Because the LM statistic uses an auxiliary regression its sometimes called an nR2 stat,Economics 20 - Prof. Anderson,16,LM Statistic (cont),Suppose we have a standard model, y =
14、b0 + b1x1 + b2x2 + . . . bkxk + u and our null hypothesis is H0: bk-q+1 = 0, . , bk = 0 First, we just run the restricted model,Economics 20 - Prof. Anderson,17,LM Statistic (cont),With a large sample, the result from an F test and from an LM test should be similar Unlike the F test and t test for o
15、ne exclusion, the LM test and F test will not be identical,Economics 20 - Prof. Anderson,18,Asymptotic Efficiency,Estimators besides OLS will be consistent However, under the Gauss-Markov assumptions, the OLS estimators will have the smallest asymptotic variances We say that OLS is asymptotically efficient Important to remember our assumptions though, if not homoskedastic, not true,
