Installation

------------
- activate the UE, Equation 14.29. Click Estimate on the equation menu bar and
click OK.

Workfile Setup
--------------
- Step 2. Set the Workfile frequency: to Undated
- data set, set the Start observation to 1 and
- End observation to 20 (refer to areas
- of 1996, select from the following options: for monthly data, set the Workfile
frequency: to monthly, and specify the
- Start date, 1980:01, and the End date, 1996:12. For quarterly data, set the
Workfile frequency: to quarterly, and
- specify the Start date, 1980:1, and the End date, 1996:4. For annual data, set
the Workfile frequency: to annual, and
- Step 1. Select File/New/Workfile on the EViews main menu bar. Set the workfile
frequency to
- identical. In this section we create a workfile, import data from a spreadsheet
and estimate a
- Step 2. Set the Workfile frequency: to Annual.
- 10. Follow the steps in Describing data to create a workfile for the problem.
Then follow the
- 13. Follow the steps in Describing data to create a workfile for the problem.
Then follow the

Data Entry
----------
- of actual economic and business phenomena." This definition highlights the
importance of
- superb editorial assistance and for making sure that the instructions in this
guide are clear and easy to follow. Your
- 1 A. H. Studenmund, Using Econometrics, A PracticalGuide (fourth edition),
Addison Wesley, 2000, p. 3.
- as a filing cabinet or organizer for the item with which you are working. The
most important
- association with the information contained in the object. For example, a series
object is a
- The most fundamental objects in EViews are workfiles, series, and equation
objects. There are,
- includes: Coefficient Vector, Databases, Equation, Graph, Group, Model, Pool
(Time Series /
- Cross-Section), Sample, Series, State Space, System, SYM (Symmetric Matrix),
Table, Text,
- series (filled with NA's).
- are commonly found in time series data. All of the operators described below may
be used in
- expressions involving series and scalar values. When applied to a series
expression, the operation
- creating an EViews workfile and importing data into the new workfile from an
Excel file will be
- 1 Using Econometrics, A Practical Guide (fourth edition), by A. H. Studenmund
will be referred to as (UE) when
- 2 For monthly, quarterly, or annual time series data, with observations ranging
from the beginning of 1980 to the end
- boxed in red: the coefficient vector named c and the residual series named resid.
(see the figure
- Step 1. To create a new series for the weight (Y) variable, select Objects/New
Object/Series from
- of the observations in the series will be assigned the missing value code 'NA'.3
- Step 2. To enter data into the newly created series, double click the series in
the workfile window
- and click edit+/- on the series window menu bar. The numbers from the table can
be entered to
- been entered, click edit+/- on the series window menu bar to save the changes and
exit the edit
- function. The series window can be closed by clicking the
- the series window.
- Most data are available in spreadsheet file or ASCII text file format, which can
be imported
- directly into the workfile. The procedure for importing the weight and height
data from an ASCII
- text file will be explained in Chapter 2. The edit procedure described above is
mostly used to
- adjust data series after they are imported. In cases where expressions can be
used to assign
- values for the series, click on Quick/Generate Series or click on Genr on the
workfile window
- menu bar and enter the expression defining the series. For more information on
how to generate
- a series using expressions, see Help/Contents/EViews Basics/Working with Series.
- 3 A series can also be created by clicking on Quick/Generate Series on the main
menu bar or by clicking on Genr
- EViews provides specialized tools for working with groups of series. Follow these
steps to create
- a group object containing the Y & X series:
- Step 2. To plot Y against X, open the two series in a group window (enter X
before Y because EViews
- 5 Features of Groups: A group is simply a list of series identifiers, not a copy
of the data in the series. If you
- change the data for one of the series in the group, you will see the changes
reflected in the group. If you delete a
- series from the workfile, it will disappear from any group that included the
series. If the deleted series is the only
- series in a group, the group will also be deleted. Renaming a series changes the
reference in every group containing
- the series. Groups, like other EViews objects, contain their own views and
procedures. A detailed description can be
- workfile and enter data. If you want to skip these steps, open the EViews
workfile named
- Step 3. To create a new series for the help-wanted advertising index (hwi)
variable, select
- Objects/New Object/Series from the main menu or the workfile menu, enter hwi in
the Name
- for Object: window and click OK. All of the observations in the series will be
assigned the
- Step 4. To enter data into the newly created series, double click the series in
the workfile window
- and click edit+/- on the series window menu bar. The numbers from the table can
be entered to
- been entered, click edit+/- on the series window menu bar to save the changes and
exit the edit
- function. The series window can be closed by clicking the
- the series window.
- Equation Specification: window that appears, using spaces between each term. It
is important to
- 4. Importing data from a spreadsheet file named Beef 2.xls
- important to calculate estimated regression coefficients without the aid of a
regression program
- figure on right). It is important to enter the dependent variable first (Y in
this case).
- 1 Using Econometrics, A Practical Guide (fourth edition), by A. H. Studenmund
will be referred to as (UE) when
- Most of the important statistical information relating to a regression is
reported in the EViews
- will not discuss these now, but they will be very important when Hypothesis
Testing is discussed
- Importing data from a spreadsheet file named Beef2.xls:
- Once the workfile has been created, it is a simple matter to import data from
another file.
- Step 2. Note that the first data series starts in cell A2 and that the data are
in three contiguous
- Follow these steps to import the data from the
- Step 2. Click Procs/Import/Read Text-Lotus-Excel
- the number of series (note that when you enter the
- number of series, EViews will enter the names of
- the series that are printed in the row above each
- data series).
- complete the import
- Excel. If the error message does not display, the data was successfully imported.
- The views in the third block are for specialized statistics for time series data.
- Mean is the average value of the series, obtained by adding up the series and
dividing by the number of
- observations. Median is the middle value (or average of the two middle values) of
the series when the values are
- sensitive to outliers than the mean. Max and Min are the maximum and minimum
values of the series in the current
- sample. Std. Dev. (standard deviation) is a measure of dispersion or spread in
the series. Skewness is a measure of
- asymmetry of the distribution of the series around its mean. Kurtosis measures
the peakedness or flatness of the
- distribution of the series. Jarque-Bera is a test statistic for testing whether
the series is normally distributed. The test
- statistic measures the difference of the skewness and kurtosis of the series with
those from the normal distribution.
- 4 View/Correlations displays the correlation matrix of the series in the selected
group. Observations for which any
- one of the series has missing data are excluded from the calculation.
- The following names are reserved and should not be used for series: ABS, ACOS,
AR, ASIN, C, CON, CNORM,
- SERIES X=10+NRND
- column to store the sample βs, and the third command creates a series named X
equal to 10 plus
- SERIES Y=X+0.25*@RNORM
- SERIES Y=X+0.25*@RNORM
- The first command writes the matrix named BETA as a series to an Excel file named
EXCEL, the
- observations,2 the third command reads the series named excel into the EViews
workfile and
- The three figures below show how the probability distribution of the estimated
sample β series
- While it is important to be able to apply the decision rule by comparing the
calculated t-value
- is irrelevant. The four important specification criteria (UE, pp. 167-168) don't
always
- be edited for presentations or reports. Frozen views do not change when the
workfile sample is changed or
- 3 This creates a new series with forecast values of Y based on the estimated
coefficients for EQ02.
- only objective here is to create a forecast series, not a forecast evaluation),
and click OK.
- A new series named SF appears in the workfile window.
- 3 The coefficients should be referred to as C(1), C(2), and so on (do not use
series names). Multiple
- on (do not use series names).
- 1. Creating a residual series from a regression model
- Creating a residual series from a regression model:
- save the results in an equation named EQ01, make a residual series named E, and
save
- Step 4. To create a new series for the residuals
- Residual Series on the equation window menu
- E in the Name for residual series: window,
- residual series will be displayed in a new
- Complete the section entitled Creating a residual series from a regression model
before
- attempting this section (i.e., Equation EQ01 and series E should already be
present in the
- bar to reveal the graph on the left below. Note the residual series exhibits a
pattern akin to
- serial correlation. Steps 3 and 4 below show how to generate a time series plot
of the
- same residual series E.
- Step 3. Open the residual series named E in a new window by double clicking the
series icon
- in the workfile window to open the residual series from EQ01 in a new window.
- Step 4. Select View/Line Graph to reveal a time series graph of the residuals
shown below.
- Complete the section entitled Creating a residual series from a regression model
before
- attempting this section (i.e., Equation EQ01 and series E should already be
present in the
- 0.0006). It is important to note that this is not a test of serial correlation,
but the value of
- Complete the section entitled Creating a residual series from a regression model
before
- Step 2. Follow the steps in Creating a residual series from a regression model
to estimate the
- residual series for EQ01 named E.
- Step 5. To calculate the new residual series, enter the following formula in the
command
- window: series E = LOG(SDH)-(EQ03.@COEFS(1) + EQ03.@COEFS(2)*LOG(USD)
- Step 6. Re-run EQ02, EQ03 and the series E equation7 in Step 6 sequentially
until the
- menu bar, and clicking OK. You can re-run the series e equation by clicking the
cursor anywhere on the
- Step 4. Make a residual series named E and save the workfile.
- 3 EViews performs weighted least squares by first dividing the weight series by
its mean, then multiplying
- all of the data for each observation by the scaled weight series. The scaling of
the weight series is a
- least squares is not appropriate in situations where the scale of the weight
series is relevant, as in frequency
- series SQUAREDERROR=(Y-@MEAN(Y))^2. After that enter the
- Chapter 12: Time Series Models
- 1 You can include a consecutive range of lagged series by using the word "to"
between the lags. YD(0 to -3) is
- Step 2. Open CO in one window by double clicking the series icon in the workfile
window.
- CO series menu bar and a Correlogram Specification dialog box appears. Select
level in the
- sign that the series obeys a
- series violates the third criteria for stationarity (UE, top of p. 425) and
provides strong evidence
- that the CO series is non-stationary.
- hypothesis that the CO series is non-stationary:
- Step 2. Open CO in one window by double clicking the series icon in the workfile
window. Note that
- in the previous section. You can select View/Spreadsheet to view the series data
or just proceed
- Step 3. To conduct the Dickey-Fuller (DF) test, select View/Unit Root Test… on
the CO series
- 6 If the AC(1) is nonzero, it means that the series is first order serially
correlated. If AC(k) dies off more or less
- geometrically with increasing lag k, it is a sign that the series obeys a low-
order autoregressive (AR) process. If
- AC(k) drops to zero after a small number of lags, it is a sign that the series
obeys a low-order moving-average (MA)
- the Level, 1st difference, or 2nd difference of the series (select level for this
example).8 Third,
- Step 5. The test fails to reject the null hypothesis of a unit root in the CO
series at any of the reported
- 8 You can use this option to determine the number of unit roots in the series. If
the test fails to reject the test in levels
- but rejects the test in first differences, then the series contains one unit root
and is of integrated order one I(1). If the
- test fails to reject the test in levels and first differences but rejects the
test in second differences, then the series
- In order to determine whether the first differenced series10 is stationary,
follow the steps in the
- 10 To use first differencing to rid a series of nonstationarity, simply enter
D(CO) for the series in any EViews
- Step 5. Enter the formula series JFOLSP = JFOLS >= 0.5 in the command window and
press Enter.
- A series named JFOLSP is created that predicts whether a women is expected to be
in the labor
- Step 6. Enter the formula series OLSP = JFOLSP=J in the command window and press
Enter to
- calculate a series that equals 1 if the OLS model predicted correctly and 0 if
not.
- Step 7. Enter the formula series JFWLSP = JFWLS >= 0.5 in the command window and
press Enter.
- A series named JFWLSP is created that predicts whether a women is expected to be
in the labor
- Step 8. Enter the formula series WLSP =JFWLSP=J in the command window and press
Enter to
- calculate a series that equals 1 if the WLS model predicted correctly and 0 if
not.
- Step 7. Enter the formula series JFLOGP = JFLOG >= 0.5 in the command window and
press Enter.
- A series named JFLOGP is created that predicts whether a women is expected to be
in the labor
- Step 8. Enter the formula series LOGP = JFLOGP=J in the command window and press
Enter to
- calculate a series that equals 1 if the LOG model predicted correctly and 0 if
not.
- Step 7. Enter the formula series JFPROP = JFPRO >= 0.5 in the command window and
press Enter.
- A series named JFPROP is created that predicts whether a women is expected to be
in the labor
- Step 8. Enter the formula series PROP = JFPROP=J to calculate a series that
equals 1 if the PRO
- 1. Generating time series for taxes and net exports using structural equations
(UE, p. 477)
- variables that are included in the macroeconomic model must be generated from
other data series
- Generating time series for taxes and net exports using structural equations (UE,
p. 477):
- Follow these steps to generate time series values for T (taxes) and NX (net
exports) using the
- Step 2. To generate a new series named T for taxes, select Genr on the workfile
menu bar, type T=Y-
- YD in the Enter equation: window, and click OK. A new series icon for T is
created in the
- Step 3. To generate a new series named NX for net exports, select Genr on the
workfile menu bar,
- type NX=Y-CO-I-G in the Enter equation: window, and click OK. A new series icon
for NX is
- table below), click edit+/- on the group menu bar, scroll to the bottom of the
spreadsheet and
- entry and click edit+/- on the group menu bar a second time to save your changes.
Scroll to the
- Step 2. Open EQ01 by double clicking its icon in the workfile window. Create a
new series for the
- residuals (errors) for EQ01, by selecting Procs/Make Residual Series on the EQ01
window
- menu bar, enter the name E as the Name for residual series, and click OK.
- Step 5. Calculate the new residual series by typing the following formula in the
command window:
- series E = Y-(EQ03.@COEFS(1) + EQ03.@COEFS(2)*PC + EQ03.@COEFS(3)*PB +
- Step 6. Re-run EQ02, EQ03 and the series E equation3 in step 5 sequentially
until the estimated ρ (i.e.,
- clicking OK. You can re-run the series e equation by clicking the cursor anywhere
on the equation in the command
- the workfile window, click edit+/- on the series menu bar, scroll to the bottom
of the
- press Enter. To save your changes, click edit+/- on the series menu bar a second
time.
- weight of the male student standing 6'1" tall, double click the YF series icon in
the workfile
- Step 6. Select Procs/Make Residual Series on the EQ01 window menu bar. Enter the
name E as the
- Name for residual series, and click OK.
- Step 7. Generate a new series for the residuals squared (i.e., E2) by selecting
Genr on the workfile
- Step 8. Generate a new series named XDEV2 for the residuals squared by selecting
Genr on the
- differencing the series being forecast. A first-order integrated component means
that the
- forecasting model is designed for the first difference of the original series. A
second-order
- three building blocks described above. You can use the correlogram view of a
series for this
- Step 6. To view the forecast, double click the COF series and scroll to the
bottom of the spreadsheet
- Follow these steps to view a histogram and the standard descriptive statistics
for a series:
- variable named Y1997 and enter the 1997 returns from UE, Table 16.2, p. 522 into
the series.
- The EViews output shows a histogram of the data series plus major descriptive
statistics. The
- histogram divides the series range (the distance between the maximum and minimum
values)
- characteristics of a series (see UE 16.2).
- the window identifies the series name, sample, and the number of observations.
The descriptive
- 1. Mean (the average value of the series, obtained by adding up the series and
dividing by the
- 2. Median (the middle value (or average of the two middle values) of the series
when the values
- 3. Maximum (the maximum value of the series in the current sample)
- 4. Minimum (the minimum value of the series in the current sample)
- 5. Std. Dev. (standard deviation) is a measure of dispersion or spread in the
series
- series observations about its mean divided by the number of observations (i.e.,
divided by n
- Step 2. Type series Y1997standized = (y1997-@mean(Y1997))/@stdev(Y1997) in the
command
- Step 3. To view the standardized values for Y1997, double click the
Y1997standized series icon in
- mutual fund returns (i.e., series Y1998), follow these steps:
- Step 2. Double click the Y1998 series icon in the workfile window.
- Step 3. Select View/Tests for Descriptive Stats/Simple Hypothesis Tests on the
series menu bar to
- reveal the Series Distributions Tests dialog window. Enter 28.1 in the Mean:
window under Test
- 3 You can enter a value for the series standard deviation in the window under
Mean Test Assumption:, if it is known.

Regression
----------
- collection of information related to a set of observations on a particular
variable. An equation
- Since an equation object contains all of the information relevant to an estimated
relationship, you
- can move freely between a variety of equation specifications simply by choosing
to work with a
- different equation object. You can examine results, perform hypothesis and
specification tests, or
- VAR (Vector Autoregression), Vector/Row, and Vector Scalar. All objects, except
workfiles and
- Chapter 1: An Overview of Regression Analysis
- 1. A simple example of regression analysis (UE 1.4):
- Section 1.4 describes how a weight guesser can use regression analysis to make
better guesses
- Step 3. Select View/Graph/Scatter/Scatter with Regression and
- line representing the regression equation between the two
- variables (i.e., plots UE, Equation 1.21, p. 21). As you can see
- relationship between Y and X. The equation represented in
- Figures 1a & 1b has the following formula (see UE Equation
- 1.21, p. 21): Estimated weight (Y) = 103.40 + 6.38 * Height
- the Enter Equation: window. Click OK and a new variable named predicted appears
in the
- Equation: window. Click OK and a new variable named residual will appear in the
workfile
- residual<=10)-.6*(residual<-10 or residual>10) in the Enter Equation: window.6
Click OK and
- The process of running a regression is explained, in detail, in Chapter 2, but a
short description
- of the process is presented here. Follow these steps to run the regression
between hwi and ur:
- Step 2. Select Objects/New Object/Equation and click OK (or Quick/Estimate
Equation from the
- Step 3. Enter the dependent variable (hwi), the constant (c) and the independent
variable (ur) in the
- enter the dependent variable first (hwi in this case).
- Step 4. Select the estimation method {LS - Least Squares (NLS and ARMA)}. EViews
uses this as
- Step 6. Click OK when finished to reveal the regression output generated by
EViews.
- Chapter 2: Ordinary Least Squares
- 1. Running a simple regression for weight/height example (UE 2.1.4)
- 2. Contents of the EViews equation window
- 5. Using EViews to estimate a multiple regression model of beef demand (UE 2.2.3)
- Ordinary Least Squares (OLS) regression is the core of econometric analysis.
While it is
- regression programs makes it unnecessary for everyday analysis.1 In this chapter,
we will
- estimate simple and multivariate regression models in order to pinpoint where the
regression
- Running a simple regression for weight/height example (UE 2.1.4):
- Regression estimation in EViews is performed using the equation object. To create
an equation
- Object/Equation from the
- equation (e.g., EQ01) in the
- independent variable height
- (X) in the Equation
- 2 Alternately, select Quick/Estimate Equation from the main menu. If this method
is used, the equation must be
- named to save it. Click Name on the equation menu bar and enter the desired name
and click OK.
- Step 5. Select the estimation Method {LS - Least Squares (NLS and ARMA)}. This
is the default
- range is desired. Click OK to view the EViews Least Squares regression output
table.
- Contents of the EViews equation window:
- equation window (see the figure below). General information concerning the
regression is
- equation window.
- General Information Printed in the Top Portion of the Equation Output: The first
five or
- dependent variable.
- Line 2. Regression method
- regression was executed.
- in the regression.
- your regression.
- case because no observations are excluded (i.e., no variable, included in the
regression, has
- Coefficient Results: Key information regarding the estimated regression
coefficients is reported
- in a table displayed in the middle of the regression output (see area highlighted
in yellow). The
- reports the estimated coefficient values (i.e., βˆ o & βˆ 1). Note that the
estimated coefficients are
- the same as those printed in (UE, Equation 1.21, pp. 20 & 21). The data printed
in columns (3) -
- Summary Statistics: Key summary statistics are reported in four columns below the
equation
- R : coefficient of determination is the fraction of the variance of the dependent
variable
- explained by the independent variables (p. 50);
- 3. Standard Error of the Regression (S.E. of regression): called Standard Error
of Estimate
- 7. Mean dependent var: measure of central tendency for the dependent variable
(pp. 522-526);
- 8. S.D. dependent var: measure of dispersion (Standard Deviation) for the
dependent variable
- intercept) in a regression are zero (pp. 142−145);
- Multivariate Regression (2.2.3):
- Multivariate regression is executed the same as simple regression in EViews and
the output is
- multivariate regression model using the Beef example (UE, p. 45).
- Using EViews to estimate a multiple regression model of beef demand (UE 2.2.3):
- Step 2. Select Objects/New Object/Equation on the workfile menu bar and enter B
C P Yd in the
- Equation Specification: window. Do not change the default settings for Method and
Sample.
- regression results shown in
- Least Squares output table
- Equation 2.10, p. 44.
- of the Estimated Model
- under the coefficients column of the table printed in the middle of the EViews
regression output
- regression for weight/height example of the EViews guide to regress per capita
income as a
- Chapter 3: Learning To Use Regression Analysis
- 4. Running a simple regression for Woody's Restaurants example (UE, Table 3.2)
- Running a simple regression for Woody's Restaurants example (UE 3.2):
- Step 2. To estimate UE, Equation 3.6, p. 74, select Objects/New Object/Equation
on the workfile
- menu bar.5 You can name the equation object now by deleting Untitled in the Name
for Object:
- window and typing a name for the equation you are about to estimate, or you can
skip this step
- and name the equation later (if you find that it is worth saving). Click OK to
reveal the Equation
- Step 3. Enter Y C N P I in the Equation Specification: window.
- Step 6. To name the equation for later use, select Name on the equation window
menu bar, enter
- All of the data necessary to write the results printed in (UE, Equation 3.7, p.
77) are printed in
- the EViews regression output. EViews provides a variety of views for regression
results. For
- process by clicking View/Representations on the equation window menu bar to get
the
- Estimation Equation:
- Equation 3.7.
- 5 Alternately, select Quick/Estimate Equation from the main menu. If this method
is used, you must name the
- equation to save it. Click Name on the equation menu bar and enter the desired
name in the Name for object:
- Displaying the actual, fitted, residual, and a plot of the residuals for a
regression (see UE,
- Step 1. Open the EViews workfile named Woody3.wf1 and open the equation named
EQ01 by double
- clicking the equation icon in the workfile window.
- Step 2a. Click View/Actual,Fitted,Residual/Actual,Fitted,Residual Table on the
equation window
- Step 2b. Alternately, to display a graph of the actual, fitted, and residuals for
a regression, click
- to reveal the figure below right. Other views available in the equation window
will be explained
- Demonstrate that the estimated βs are drawn from a normal distribution (UE 4.3.2,
pp. 101-
- EQUATION EQ1.LS Y X
- What this does: The first command generates a random number named y (UE, Equation
4.11, p.
- 101), the second command estimates the regression with y as the dependent
variable and x as the
- independent variable (no constant), and the third command saves the β coefficient
on x in the
- EQUATION EQ1.LS Y X
- 1 Enter the number that equals the number of sample βs you plan to estimate. The
number 20 was selected for this
- 1. Viewing the t-value from an OLS regression (UE 5.2.1)
- Viewing the t-value from an OLS regression (UE 5.2.1):
- concerning the coefficients on the independent variables in an OLS regression
model. Follow
- these steps to open the Woody's Restaurant workfile in EViews and run the
regression for the
- equation Yt = βˆ 0 + βˆ NNt + βˆ pPt + βˆ iIt + et .
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter Y C N
P I in the
- Equation Specification: window, and click OK. EViews generates the following
output (also
- Dependent Variable: Y
- Method: Least Squares
- S.E. of regression
- EViews equation output table (highlighted in yellow). The first column identifies
the name of the
- variable. The second column reports the estimated coefficient ( βˆ k) for each
variable, and the
- third column reports the standard error for the estimated coefficient (SE βˆ k).
The fourth column
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter Y C N
P I in the
- Equation Specification: window, and click OK.
- Step 3. Select Name on the equation window menu bar, enter EQ01 in the Name to
identify object:
- for Woody's Restaurants regression), type the following command in the command
window:
- in the first row of the vector object named result, type the following equation
in the command
- in the second row of the vector object named result, type the following equation
in the command
- and one-tailed, 5% significance level critical t-value (tc) for the Woody's
Restaurants regression.
- equation eq01. The {eq01.} Part can be omitted if the calculation relates to the
last regression run.
- EViews OLS regression output (see the EQ01 Estimation Output table). The Prob.
value shows
- Restaurants regression, the hypothesis that the coefficient is zero ( βˆ p = 0)
is rejected at the 5%
- rule before attempting this section (i.e., an equation object named EQ01 and a
vector object
- 5 Under the assumption that the errors are normally distributed, or that the
estimated coefficients are asymptotically
- regression eq01,where i represents the coefficient number (including the
constant) listed in the EViews OLS
- number of observations used to estimate EQ01 and eq01.@ncoef calculating the
number of coefficients estimated,
- rule before attempting this section (i.e., an equation object named EQ01 and a
vector object
- rule before attempting this section (i.e., an equation object named EQ01 and a
vector object
- of independent variables (k does not include the constant) in the model. The null
hypothesis can
- t-critical for regression - 5% level of significance (two-tailed test) =
- t-critical for regression - 5% level of significance (one-tailed test) =
- The p-value printed just below the F-statistic in the EViews regression output,
denoted Prob(F-
- that all of the regression coefficients are zero. Note that the F-test is a joint
test so that even if all
- the regression coefficients in this exercise.
- estimated equation.
- determine lower and upper confidence intervals for an estimated coefficient.
- f. Review the section Using EViews to estimate a multiple regression model of
beef
- demand in Chapter 2, if you have trouble estimating this multiple regression
model using
- a. Ramsey's Regression Specification Error Test (RESET) (UE 6.8.1)
- b. Ramsey's Regression Specification Error Test (RESET) (EViews)
- should be considered. The only way to check these criteria is to run the
regression with
- relevant variable in the demand for chicken model (UE, Equation 6.8, p. 160):
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter Y C
PC PB YD
- in the Equation Specification: window, and click OK.
- Step 3. To preserve this EViews Estimation Output view of UE, Equation 6.8, p.
160, for later
- comparison, select Name on the equation menu bar, enter EQ01 in the Name to
identify
- equation window, select Estimate on the equation menu bar, delete PB from the
- Equation Specification: window, and click OK.
- Step 5. To preserve this EViews Estimation Output of UE, Equation 6.9, p. 161,
for later
- comparison, select Name on the equation menu bar, enter EQ02 in the Name to
identify
- Step 6. Compare and evaluate the two equations based on t-statistics, adjusted
R2, and bias.
- equation menu bar. The Freeze button on the objects toolbar creates a duplicate
of the current view of the
- when the data change. The purpose for freezing the regression output table is to
allow us to view it later by
- EViews makes it easy to lag variables in an equation.2 Equations 6.22 & 6.23
refer to a
- hypothetical model and they are not actually estimated in UE. However, the demand
for
- chicken model (UE, Equation 6.8, p. 160) will be used to show how to lag
variables in
- Step 2. To run the regression
- Object/Equation on the
- Equation Specification:
- but the equation
- in a regression,
- If you specify a regression with PC lagged one period, EViews will not adjust the
sample
- Ramsey's Regression Specification Error Test (RESET) (UE 6.8.1):
- workfile). Follow these steps to carry out the Ramsey's Regression Specification
Error
- Step 2. Open EQ02 by double clicking its icon in the workfile window (see UE,
Equation 6.9,
- Step 3. Select Forecast on the equation menu bar, enter YF in the Forecast
name: window,
- Step 4. Select Objects/New Object/Equation on the workfile menu bar, enter Y C
PC YD
- YF^2 YF^3 YF^4 in the Equation Specification: window, and click OK (see UE,
Equation
- Step 5. Select Name on the equation menu bar, enter EQ03 in the Name to identify
object:
- Step 6. Select View/Coefficient Tests/Wald-Coefficient Restrictions on the
equation menu
- the variable as it was entered in the Equation Specification: window, following
the dependent variable.
- Thus, C(4),C(5) and C(6) represent the coefficients for YF^2 YF^3 YF^4 in the
Equation Specification: Y C
- Ramsey's Regression Specification Error Test (RESET) (EViews):
- workfile). Follow these steps to carry out the Ramsey's Regression Specification
Error
- Step 2. Open EQ02 by double clicking its icon in the workfile window (see UE,
Equation 6.9,
- above the regression
- 6 The fitted terms are the powers of the fitted values from the original
regression, starting with the square or
- second power. For example, if you specify 3, then the test will add ŷ2, ŷ3, and
ŷ4 in the regression. If you
- an equation estimated by least squares.
- Test Equation:
- Dependent Variable: Y
- Method: Least Squares
- S.E. of regression
- are both printed in the Estimation Output of EViews' OLS regressions.
- Step 2. Open EQ01 by double clicking its icon in the workfile window (see UE,
Equation 6.8,
- Dependent Variable: Y
- Method: Least Squares
- S.E. of regression
- Step 3. Open EQ02 by double clicking its icon in the workfile window (see UE,
Equation 6.9,
- Dependent Variable: Y
- Method: Least Squares
- S.E. of regression
- highlighted in yellow) are larger when PB is omitted from the OLS regression
(i.e.,
- EQ02). Both Akaike's and the Schwartz Criterion provide evidence that UE,
Equation 6.8
- (i.e., EViews EQ01) is preferable to UE, Equation 6.9 (i.e., EViews EQ02).
- i) Select Objects/New Object/Equation on the workfile menu bar, enter P C
- GDPN CVN PP DPC IPC CV in the Equation Specification: window, and
- click OK. Select Name on the equation window menu bar, enter EQ01 in the
- ii) Select Objects/New Object/Equation on the workfile menu bar, enter P C
- GDPN CVN PP DPC IPC N in the Equation Specification: window, and click
- OK. Select Name on the equation window menu bar, enter EQ02 in the Name
- guide, but you must realize that Y represents the dependent variable while X1 &
X2
- represent the only independent variables in all of the equations/specifications.
Note that a
- p. 201). You must have a workfile open in order to specify and estimate a
regression
- model. Then, to specify a regression model in EViews, select Objects/New
- Object/Equation from the workfile menu and enter the appropriate EViews
specification
- (see the last column of the table below), in the Equation Specification: window.1
- Section Equation #
- Equation specification
- The dependent variable must be in the same form when using R2 and adjusted R2 to
- compare the overall goodness of fit between two equations. For example, it would
not be
- 1 Alternately, select Quick/Estimate Equation from the main menu. If this method
is used you must name
- the equation to save it. Select Name on the equation menu bar and enter the
desired name in the Name to
- accelerate from 0 to 60 miles per hour) as the dependent variable versus using
the natural
- log of S as the dependent variable. In both models, the independent variables are
the
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter S C T
E P H in
- the Equation Specification: window, and click OK.
- Step 3. Select Name on the equation menu bar, write linear in the Name to
identify object:
- window, and click OK. Minimize the equation object named linear.
- Step 4. Select Objects/New Object/Equation on the workfile menu bar, enter
log(S) C T E P
- H in the Equation Specification: window (i.e., the log-lin functional form), and
click
- Step 5. Select Name on the equation menu bar, write loglin in the Name to
identify object:
- Step 6. Select Forecast on the equation menu bar, select S in the Forecast of:2
window, enter
- Steps 7, 8 & 9 calculate the quasi-R2 for this regression (UE 7.3.1, footnote 5,
p. 215).
- Step 7. Minimize the equation window, select Genr on the workfile menu bar, type
- numerator=(S-SF)^2 in the Enter equation: window, and click OK (this step
generates
- the un-summed variable in the numerator of the quasi-R2 equation).
- Enter equation: window, and click OK (this step generates the un-summed variable
in the
- denominator of the quasi-R2 equation).
- Step 9. To calculate the quasi-R2, type the following equation in the command
window and
- calculated in Step 9 (i.e., 0.78) is in-between the R2 from the linear model
estimated in
- Step 2 (i.e., 0.71) and the R2 from the log-lin model estimated in Step 5 (i.e.,
0.81).
- The F-test can be used to test a wide range of hypothesis concerning regression
- the car. Translating this into the language of UE, Equation 7.28, p. 235, this
means that
- the coefficient on Hi. Just looking at the size of the estimated coefficients, it
appears that
- coefficient on Ti by the coefficient on Hi). However, these coefficients are just
estimates.
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter S C T
E P H in
- the Equation Specification: window, and click OK.
- Step 3. Select Name on the equation menu bar, write EQ01 in the Name to identify
object:
- Step 4. Select View/Coefficients Tests/Wald-Coefficient Restrictions … on the
equation
- Equation: EQ01
- coefficient restrictions must be separated by commas and the restrictions should
be expressed as equations
- involving estimated coefficients and constants. The coefficients should be
referred to as C(1), C(2), and so
- Chow's Breakpoint Test divides the data into two sub-samples.5 It then estimates
the
- same equation for each sub-sample separately, to see whether there are
significant
- differences in the estimated equations. A significant difference indicates a
structural
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter Y C
PC PB YD
- in the Equation Specification: window, and click OK.
- Step 3. Select Name on the equation menu bar, write EQ01 in the Name to identify
object:
- Step 4. Select View/Stability Tests/Chow Breakpoint Test… on the equation menu
bar, enter
- calculates the F-statistic using the formula printed in UE, Equation 7.36, p.
242. In this
- 4 To have EViews calculate the 5% critical F-value for this problem, type the
following equation in the
- as the number of estimated parameters. This may be a problem if, for example, you
want to test for
- number of independent variables in the model (i.e., m = 2 in this case because
one
- 6 To have EViews calculate the 5% critical F-value for this problem, type the
following equation in the
- EViews is incapable of generating estimates of regression coefficients when the
model
- equation specification contains two or more perfectly collinear (or even some
highly
- Step 2. Create a group object for the variables found in UE, Equation 8.24, p.
268 (i.e., F PF
- regression model is to select Procs/Make Regressor Group on the equation window
- variables in a regression model is explained in UE, p. 257. Use the following
steps to
- calculate the VIF for the PF explanatory variable in UE, Equation 8.24, p. 268:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter PF C
PB
- log(YD) N P in the Equation Specification: window, and click OK. Note the R2 =
- Step 3. To save this regression, select Name on the equation window menu bar,
enter EQPF
- Step 4. To calculate the VIF for the variable PF, write the equation: scalar
VIFPF=1/(1-
- explanatory variables in UE, Equation 8.24, p. 268.
- the transformation in the Equation Specification: window in EViews. In many ways,
the
- latter is preferred because the equation output labels depict the transformation.
- correlations and high VIF's in the implied regression model.
- coefficients and Calculating Variance Inflation Factors to check UE, Equation
8.25,
- f. Run the regressions for this problem using the Mine8.wf1 data set.
- 3. Using regression to estimate ρ, the first order serial correlation coefficient
(UE,
- Equation 9.1, pp. 311-312)
- 5. Estimating generalized least squares using the AR(1) method (UE 9.4.2)
- 6. Estimating generalized least squares (GLS) equations using the Cochrane-Orcutt
- chicken model specified in UE, Equation 6.8, p. 166, will be used to demonstrate
most of
- Follow these steps to estimate the demand for chicken model (UE, Equation 6.8, p.
166),
- Step 2. Select Objects/New Object/Equation on the workfile menu bar and enter Y
C PC PB
- YD in the Equation Specification: window, and click OK.
- Step 3. Select Name on the equation window menu bar, enter EQ01 in the Name to
identify
- Step 2. Select View/Actual, Fitted, Residual/Residual Graph on the equation
window menu
- Using regression to estimate ρ, the first order serial correlation coefficient
(UE,
- Equation 9.1, pp. 311-312):1
- workfile). Follow the steps below to estimate the first order serial correlation
coefficient
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter E C
E(-1) in
- the Equation Specification: window, and click OK to reveal the regression output
shown
- represents the first-order autocorrelation coefficient in this regression. In
this case, the
- Step 3. Select Name on the equation menu bar, enter EQ02 in the Name to identify
object:
- period and two periods by entering E C E(-1) E(-2) in the Equation
Specification: window, and click OK.
- periods enter E C E(-4) in the Equation Specification: window, and click OK.
Similarly, to detect seasonal
- E(-12) in the Equation Specification: window, and click OK.
- attempting this section (i.e., Equation EQ01 should already be present in the
workfile).
- Step 2. Select View/Estimation Output on the EQ01 menu bar to reveal the
regression output
- measures the linear association between adjacent residuals from a regression
model. The Durbin-Watson is
- form. As a rule of thumb, with 50 or more observations and only a few independent
variables, a DW
- Estimating generalized least squares (GLS) equations using the AR(1) method (UE
- Follow these steps to estimate the chicken demand model using the AR(1) method of
- GLS equation estimation.
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter Y C
PC PB
- YD AR(1) in the Equation Specification: window, and click OK to reveal the
output
- estimation, estimates the model, and reports the adjusted sample along with the
remainder
- The estimated coefficients, coefficient standard errors, and t-statistics may be
interpreted
- in the usual manner. The estimated coefficient on the AR(1) variable is the
serial
- models estimated with EViews, the residual-based regression statistics—such as
the, the standard error of
- regression, and the Durbin-Watson statistic— reported by EViews are based on the
one-period-ahead
- estimation can be performed using standard linear regression. EViews estimates AR
models using
- nonlinear regression techniques. This approach has the advantage of being easy to
understand, generally
- Estimating generalized least squares (GLS) equations using the Cochrane-Orcutt
- the value for the estimated first order serial correlation coefficient converges.
Follow
- these steps to use the Cochrane-Orcutt method to estimate the CIA's "high"
estimate of
- Soviet defense expenditures (i.e., this is UE, Exercise 14, Equation 9.28, p.
342).
- OLS equation LOG(SDH) C LOG(USD) LOG(SY) LOG(SP), name it EQ01, and create a
- Step 3. Estimate ρ, and name it EQ02 .
- Step 4. To estimate the generalized differenced form of UE, Equation 9.28,
select
- Objects/New Object/Equation on the workfile menu bar, enter EQ03 in the Name to
- 1)) LOG(SP)-EQ02.@COEFS(2)*LOG(SP(-1)) in the Equation Specification: window.
- OLS output. The variable names are truncated in the EViews regression output
table
- because they don't fit in the variable name cell. Nonetheless, the regression is
correct. 6
- 5 Statistical output for previously saved equations can be recalled by typing the
equation name followed by
- expression EQ02.@coefs(2) can be used for ρ in the Equation Specification:
window.
- 6 The equation can be viewed by selecting View/Representations on the equation
menu bar. The equation
- estimated ρ (i.e., the coefficient on the E(-1) term from EQ02) does not change
by more
- value for the estimated constant in the lower left of the screen.
- The final equation is LOG(SDH) = 3.552082480728 + 0.107961186*(LOG(USD)) +
- equation reported in UE, Exercise 14, Equation 9.28, p. 342.
- 15. Follow the steps explained in the Estimating generalized least squares (GLS)
- equations using the Cochrane-Orcutt method section, using SDL as the dependent
- 7 You can re-run an equation by opening the equation in a window, selecting
Estimate on the equation
- equation in the command window and hitting Enter on the keyboard.
- 4. Remedies for heteroskedasticity: weighted least squares (UE 10.4.1)
- regression against suspected variables, the researcher can often observe whether
the
- Follow these steps to graph the residual from a regression against each of the
independent
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter PCON
C REG
- TAX in the Equation Specification: window, and. click OK.
- Step 3. Select Name on the equation menu bar, enter EQ01 in the Name to identify
object:
- Object/Equation on the
- Equation Specification:
- Testing for heteroskedasticity: White's test (UE 10.3.3 & UE, Equation 10.12):
- Object/Equation on the
- Equation Specification:
- the regression in Step 2,
- test regression. The Obs*R-
- observations (n) times the R2 from the test regression. White’s test statistic is
- coefficients, excluding the constant, in the test regression (five in this
example).
- Remedies for heteroskedasticity: weighted least squares (UE 10.4.1):
- Follow these steps to estimate the weighted least squares using REG as the
- Object/Equation on
- Equation
- Object/Equation on the
- in the Equation
- select OK again to estimate the equation.
- Note that the weighted least squares
- the EViews weighted least squares
- Follow these steps to estimate heteroskedasticity corrected standard errors
regression:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar and enter
PCON C
- REG TAX in the Equation Specification: window, and select the O
- and select OK again to estimate the
- equation.
- from the regression with the
- uncorrected OLS regression on the
- Follow these steps to estimate UE, Equation 10.30, p. 374:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter
PCON/POP C
- REG/POP TAX in the Equation Specification: window, and click OK.
- d. Refer to Remedies for heteroskedasticity: weighted least squares.
- a. Refer to Estimate a multiple regression model using EViews and Serial
- Chapter 11: A Regression User's Handbook
- S.E. of regression (SEE)
- Estimated first-order
- Using regression to estimate ρ, the first order serial correlation
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter YOUR
EQUATION
- SPECIFICATION HERE WITH THE DEPENDENT VARIABLE FIRST FOLLWOED BY C AND
- A LIST OF THE INDEPENDENT VARIABLE CHOSEN FOR EACH SPECIFICATION in the
- Equation Specification: window, and. click OK.
- Equation 12.24, p. 425)
- To estimate the ad hoc distributed lag model printed in UE, Equation 12.14,
follow these steps:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter CO C
YD(0 to -3) in
- the Equation Specification: window, and click OK.1
- Step 3. Select Name on the equation menu bar, enter the name EQ01, and click OK.
- To estimate the Koyck distributed lag model printed in UE, Equation 12.11, follow
these steps:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter CO C
YD CO(-1) in
- the Equation Specification: window, and click OK.
- Step 3. Select Name on the equation menu bar, enter the name EQ02, and click OK.
- Estimate the Koyck distributed lag model before attempting this section (i.e.,
Equation EQ02
- should already be present in the workfile). To conduct a Durbin’s h test for UE,
Equation 12.11,
- UE, Equation 12.17, is positive, enter the following command in the command
window:
- Step 3. To compute Durbin’s h test statistic shown in UE, Equation 12.17, enter
the following
- Estimate the Koyck distributed lag model before attempting this section (i.e.,
equation EQ02
- Equation 12.11, follow these steps:
- Step 2. Open the Equation
- equation menu bar
- Test Equation:
- Dependent Variable: RESID
- Method: Least Squares
- S.E. of regression
- regression. The LM test statistic is asymptotically distributed as a χ2 with p
degrees of freedom
- 2 EViews enters 2 lags by default (i.e., testing for second order serial
correlation). We will enter 1 lag to estimate the
- LM statistic for UE, Equation 12.20, p. 421.
- test regressions. Change the number in the Lags to include: to 3 in the Lag
Specification:
- Equation 12.24, p. 425):
- the other variable are zero for each equation (CO in the first equation and YD in
the second equation for the table
- null hypothesis (i.e., the number of lags) and the denominator degrees of freedom
are given by the total regression
- autoregression of order
- lags. If the pattern of autocorrelation is one that can be captured by an
autoregression of order less than k, then the
- specify whether to include an Intercept, a Trend and intercept, or None in the
test regression.
- specify the number of lagged first difference terms to add in the test regression
(0 for the DF
- Augmented Dickey-Fuller Test Equation
- Dependent Variable: D(CO)
- Method: Least Squares
- S.E. of regression
- terms to add to the test regression (selecting zero yields the DF test; choosing
numbers greater than zero generates
- regression. You have the choice of including a constant, a constant and a linear
time trend, or neither in the test
- regression.
- the Include in test equation: window. Note that the null hypothesis of a unit
root in the first
- procedure. For example, entering D(CO) as the dependent variable in a least
squares regression is the same as
- Chapter 13: Dummy Dependent Variable Techniques
- 2. Estimating the Weighted Least Squares (WLS) correction for heteroskedasticity
in the linear
- 5. Interpreting the results of binary dependent variable regression
- To estimate the linear probability model printed in UE, Equation 13.6, follow
these steps:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter J C M
S in the
- Equation Specification: window, and click OK.
- Step 3. Select Name on the equation menu bar, enter EQ01 in the Name to identify
object: window,
- Step 4. Select Forecast on the equation menu bar, enter JFOLS in the Forecast
name: window, and
- Estimating the Weighted Least Squares (WLS) correction for heteroskedasticity in
the linear
- To estimate the weighted least squares model specified in UE, Equations 13.7 &
13.8, follow
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter J/Z C
1/Z M/Z S/Z in
- the Equation Specification: window, and click OK to generate the same
coefficients and standard
- errors reported in UE, Equation 13.8.
- Step 3. Select Name on the equation menu bar, enter EQ02a in the Name to
identify object: window,
- Object/Equation on the workfile menu bar, enter J Z C M S in the Equation
Specification:
- Equation 13.8. Note that the coefficient on the Z variable is the constant (i.e.,
Z*(1/Z) = 1) and
- Step 5. Select Name on the equation menu bar, enter EQ02b in the Name to
identify object: window,
- Step 6. Select Forecast on the equation menu bar, enter JFWLS in the Forecast
name: window, and
- To estimate the binomial logit model printed in UE, Equation 13.15, follow these
steps:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar.
- Step 4. There are two parts to the binary model specification. First, in the
Equation Specification:
- field, you should type the name of the Binary dependent variable followed by a
list of regressors
- (i.e., enter J C M S in the Equation Specification: window for this example).
Second, check logit
- regression.
- Step 5. Select Name on the equation menu bar, enter EQ03 in the Name to identify
object: window,
- Step 6. Select Forecast on the equation menu bar, enter JFLOG in the Forecast
name: window, and
- opening both regression equation results in the work area (i.e., double click the
EQ01 and EQ03
- equation icons in the workfile window.
- To estimate the binomial probit model printed in UE, Equation 13.19, follow these
steps:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar.
- Step 3. From the Equation Specification: window, select the BINARY - Binary
choice (logit, probit,
- Step 4. There are two parts to the binary model specification. First, in the
Equation Specification:
- field, you should type the name of the Binary dependent variable followed by a
list of regressors
- (i.e., enter J C M S in the Equation Specification: window for this example).
Second, check
- the probit regression.
- Step 5. Select Name on the equation menu bar, enterEQ04 in the Name to identify
object: window,
- Step 6. Select Forecast on the equation menu bar, enter JFPRO in the Forecast
name: window, and
- Interpreting the results of binary dependent variable regression:
- The estimated coefficient on each independent variable is easy to interpret in an
OLS model, but
- difficult to interpret in a model estimated using the probit or logit technique.
However, the
- relative size of each coefficient reflects the relative effect of the independent
variables on the
- predicted probability for the dependent variable. Interpretation of the
coefficient values is
- complicated by the fact that estimated coefficients from a binary dependent model
cannot be
- interpreted as the marginal effect on the dependent variable.
- used to estimate the model with the
- Equation Specification: J C M S AD (see
- Chapter 14: Simultaneous Equations
- 2. Estimating CO with least squares (UE, Equation 14.31, p. 481)
- 3. Estimating two-stage least squares regression using EViews TSLS method (UE,
14.3.3)
- 4. Estimating two-stage least squares regression using two distinct stages and
OLS (UE, 14.3.1)
- be used to demonstrate the two stage-least squares procedure. The data for this
model is found in
- structural equations in the model:
- Estimating CO with least squares (UE, Equation 14.31, p. 481):
- Object/Equation on the workfile
- in the Equation Specification:
- the regression output to the right.
- Step 3. Select Name on the equation
- Estimating two-stage least squares regression using EViews TSLS method (UE,
14.3.1):
- To estimate the two-stage least squares
- model printed in UE, Equation 14.29,
- Object/Equation on the workfile
- Least Squares (TSNLS and ARMA) in
- Equation Specification: window and C G T NX CO(-1) R(-1) in the Instrument list:
window.1
- regression output reflect the selections made in the dialog window shown above.2
- Dependent Variable: CO
- Method: Two-Stage Least Squares
- S.E. of regression
- Step 4. Select Name on the equation window menu bar, enter TSLS_CO in the Name
to identify
- residuals that you would obtain from the second-stage regression if you actually
computed the two-stage least
- squares estimates in two separate stages.
- Estimating two-stage least squares regression using two distinct stages and OLS
(UE, 14.3.1):
- To estimate the two-stage least squares equation printed in UE, Equation 14.28,
using ordinary
- Step 2. To estimate the reduced form equation for YD (UE, Equation 14.27, p.
480), select
- Objects/New Object/Equation on the workfile menu bar, enter YD C G NX T CO(-1)
R(-1) in
- the Equation Specification: window, and click OK.
- Step 3. To generate the forecast values from this equation, select Forecast on
the equation menu bar,
- Step 4. To estimate the second stage equation for CO (UE, Equation 14.29, p.
481), select
- Objects/New Object/Equation on the workfile menu bar, enter CO C YDF CO(-1) in
the
- Equation Specification: window, and click OK. Note that we have used the
instrumental variable
- YDF instead of the actual variable YD for disposable income. The method,
dependent variable,
- and variable names are highlighted in yellow in the OLS regression output shown
below.
- Step 5. Select Name on the equation window menu bar, enter TSLS_OLS_CO in the
Name to
- Dependent Variable: CO
- Method: Least Squares
- S.E. of regression
- chapter, open the equations named OLS_CO, TSLS_CO and TSLS_OLS_CO, by double
clicking
- their respective icons in the workfile window, and compare the regression output.
To facilitate
- guide. Look at all three and compare the data printed in the red-boxed area for
each regression.
- Note that the estimated coefficients are larger in the OLS_CO model compared to
the TSLS_CO
- and TSLS_OLS_CO models. This supports the hypothesis that OLS estimates of
coefficients
- have a positive bias in simultaneous equation models (simultaneity bias).
Contrarily, TSLS
- estimated coefficients tend to have a downward bias. Note that the estimated
coefficients are
- EViews output) are smaller in the EViews TSLS estimated model, making the
coefficients more
- significant (i.e., higher t-statistics). In order to get accurate estimates of
standard errors and t-
- scores, the estimation should be done on a complete two-stage least squares
program (like
- EViews TSLS). When OLS is used to estimate the second stage, it ignores the fact
that the first
- In order to calculate two-stage least squares using the TSLS – Two-Stage Least
Squares (TSNLS
- states that there must be at least as many instruments as there are coefficients
in your equation.
- number of independent variables, not counting the constant, in the Equation
Specification:
- squares regression using EViews TSLS method section above.
- a. Refer to Estimating CO with least squares.
- b. Refer to Step 2 of Estimating two-stage least squares regression using two
distinct stages
- c. Refer to Steps 3 & 4 of Estimating two-stage least squares regression using
two distinct
- d. Refer to Estimating two-stage least squares regression using EViews TSLS
method.
- TSLS_CO equation. If the
- follow the steps outlined in Estimating two-stage least squares regression using
EViews
- d. Refer to Estimating CO with Least Squares (OLS) and Estimating two-stage least
squares
- regression using EViews TSLS method.
- 1. Forecasting chicken consumption using OLS (UE 15.1, Equation 6.8, p. 501)
- 2. Forecasting chicken consumption using a generalized least squares (GLS) model
estimated
- 3. Forecasting chicken consumption using a generalized least squares (GLS) model
estimated
- 5. Forecasting with simultaneous equation systems (UE 15.2.4)
- Forecasting chicken consumption using OLS (UE 15.1, Equation 6.8, p. 501):
- The chicken demand model developed in Chapter 6 was estimated using data from
1951-1994. In
- Follow these steps to forecast chicken consumption for 1995 - 1997 using ordinary
least squares:
- Step 6. Select Objects/New Object/Equation on the workfile menu bar, enter Y C PC
PB YD in the
- Equation Specification: window, change the Sample: to 1951 - 1994, and click OK.1
- Step 7. Select Name on the equation window menu bar, enter EQ01 in the Name to
identify object:
- Step 8. Select Forecast on the equation menu bar, enter YFOLS in the Forecast
name: window, set
- because the text uses rounded coefficient values for Equation 6.8 and we used
non-rounded
- EViews estimated coefficients.
- Forecasting chicken consumption using a generalized least squares model estimated
with the
- section. The OLS estimate for chicken consumption should already have been
estimated and
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter Y C PC
PB YD AR(1)
- in the Equation Specification: window, change the Sample: to 1951 - 1994, and
click OK.
- Step 3. Select Name on the equation window menu bar, enter EQ04 in the Name to
identify object:
- Step 4. Select Forecast on the equation menu bar, enter YFAR1 in the Forecast
name: window, set
- 1 The reason for changing the workfile sample back to the original setting is to
ensure that the equation estimation
- Forecasting chicken consumption using a generalized least squares model estimated
with the
- for the estimated first order serial correlation coefficient converges. Follow
these steps to use the
- Cochrane-Orcutt method to estimate a GLS model for chicken consumption. If you
have
- OLS estimate for chicken consumption should already have been estimated and saved
as EQ01
- Step 3. Select Objects/New Object/Equation on the workfile menu bar. Enter E C
E(-1) in the
- Equation Specification: window and click OK. The coefficient on the E(-1) term
(i.e., ρ), is
- evidence points to positive serial correlation. Select Name on the equation menu
bar, enter EQ02
- Step 4. Select Objects/New Object/Equation on the workfile menu bar, enter Y-
- EQ02.@COEFS(2)*YD(-1) in the Equation Specification: window, and click OK. Select
Name
- on the equation menu bar, enter EQ03 in the Name to identify object: window, and
click OK.2
- estimated constant in the lower left of the screen. The final GLS equation for
chicken
- truncated coefficient model printed in UE, Equation 9.22, p. 507.
- 2 Note that the variable names are truncated in the EViews regression output
table because they don't fit in the
- variable name cell. Nonetheless, the regression is correct. The equation, with
the entire variable names printed out,
- can be viewed by selecting View/Representations on the equation menu bar.
- 3 You can re-run an equation by opening the equation in a window, selecting
Estimate on the equation menu bar and
- EQ03 and select Forecast on the equation menu bar. Make sure that Y is checked in
the Forecast
- for Equation 9.22 and we used non-rounded EViews estimated values. Delete this
group object
- calculate the high and low estimated values for a 95% confidence interval.
- Step 3. Select Objects/New Object/Equation on the workfile menu bar, enter Y C X
in the Equation
- Specification: window, and click OK. Select Name on the equation menu bar and
enter EQ01 in
- Step 4. Select Forecast on the equation menu bar. Enter YF in the Forecast name:
window. Check to
- menu bar, entering the equation: E2=E^2 in the Enter equation: window, and
clicking OK.
- workfile menu bar, entering the equation: XDEV2=(x-@mean(x))^2 in the Enter
equation:
- one equation) in the command window, and press Enter on the keyboard:
- (all one equation) in the command window and press Enter on the keyboard:
- Forecasting with simultaneous equation systems (UE 15.2.4):
- equations and use the model for forecasting and simulation. EViews models do not
contain
- unknown coefficients to be estimated. Instead, the Model object allows you to
solve for
- steps to forecast with a simultaneous equation model:
- for your model in the Name for Object: window, click OK, and enter the previously
estimated
- equations in the model window.
- term corresponds to the use of a lagged value of the residual in the forecasting
equation for
- UE did not present an example of ARIMA estimation, but one will be estimated here
to
- demonstrate how to estimate an ARIMA model in EViews. In Chapter 12 we determined
that CO
- follow these steps to estimate an ARIMA(1,1,2)4 model for CO:
- Step 2. Select Objects/New Object/Equation on the workfile menu bar, enter D(CO)
C AR(1)
- MA(1) MA(2) in the Equation Specification: window, and click OK to view the
EViews
- equation menu bar and
- Dependent Variable: D(CO)
- Method: Least Squares
- S.E. of regression
- Estimated MA process is noninvertible
- b. Refer to Running a simple regression for Woody's Restaurants example to
estimate
- Equation 3.7 and Forecasting chicken consumption using OLS to make an
unconditional
- c. Open the EViews workfile named Fish8.wf1, select Objects/New Object/Equation
on
- the workfile menu bar, enter F C PF/PB log(YD) P in the Equation Specification:
- 3. Open the EViews workfile named Htwt1.wf1, select Objects/New Object/Equation
on the
- workfile menu bar, enter Y C X in the Equation Specification: window, and click
OK. Ask
- numbers for the Monte Carlo Simulation to demonstrate that the estimated βs are
drawn from a

Hypothesis Testing
------------------
- Under the null hypothesis of a normal distribution, the Jarque-Bera statistic is
distributed as with 2 degrees of
- observed value under the null—a small probability value leads to the rejection of
the null hypothesis of a normal
- 3. Calculating confidence intervals (UE 5.2.4)
- 4. Performing the t-test of the simple correlation coefficient (UE 5.3.3)
- 5. Performing the F-test of overall significance (UE 5.5)
- All information needed for hypothesis testing using the t-test is found in the
middle of the
- prints the calculated t-value given that the border value implied by the null
hypothesis (βHo) is
- possible to test the null hypothesis that a coefficient is zero (i.e., βHo = 0)
without knowing the
- null hypothesis, that the coefficient is zero, is rejected. Given a p-value, you
can tell at a glance if
- the null hypothesis, that the true coefficient is zero against a two-sided
alternative that it differs
- rejection of the null hypothesis, for a two-tailed test at the 5% significance
level. The appropriate
- Note that the null hypothesis is also rejected at the 1% significance level.
- Calculating confidence intervals (UE 5.2.4):
- 90% confidence interval for a coefficient using EViews:
- Step 2. To calculate the lower value for the 90% confidence interval for the
population coefficient,
- Step 3. To calculate the upper value for the 90% confidence interval for the
population coefficient,
- Step 4. To view the lower and upper confidence interval values, double click the
vector icon named
- Performing the t-test of the simple correlation coefficient (UE 5.3.3):
- named result with 10 rows should already be present in the workfile). To use the
t-test to
- Performing the F-test of overall significance (UE 5.5):
- constant, in EQ01, are zero. Under the null hypothesis with normally distributed
errors, this
- lower confidence interval =
- upper confidence interval =
- Critical value of the F-statistic - 5% level of significance =
- statistic (i.e., 15.64894), we can reject the null hypothesis that all of the
slope coefficients in
- statistic), represents the marginal significance level of the F-test. If the p-
value is less than the
- significance level you are testing, say .05, you reject the null hypothesis that
all slope
- coefficients are equal to zero. For EQ01, the p-value is 0.000003, so we reject
the null hypothesis
- how to use EViews to calculate the critical values for testing your hypothesis
concerning
- b. Review the section Performing the F-test of overall significance to learn how
to use
- EViews to calculate the critical value for the F-test of the overall significance
of the
- c. Review the section Calculating confidence intervals to learn how to use EViews
to
- a specific variable in a model, the other three criteria (i.e., t-test, adjusted
R2, and bias)
- and without the variable and evaluate the results in terms of t-test, adjusted
R2, and bias.
- calculated F-statistic of 4.32 exceeds the critical F-statistic of 2.85, the null
hypothesis
- but the p-values of both statistics indicate that we can decisively reject the
null hypothesis that the three
- the null hypothesis
- Follow these steps to carry out an F-test for the null hypothesis that the
absolute value of
- Null Hypothesis: -C(2)=-100*C(5)
- The null hypothesis is -C(2)=-100*C(5), since variable T is the second
coefficient and
- the null hypothesis cannot be rejected at the 5% level of significance. The
calculated F-
- its value.4 The reported probability is the marginal significance level of the F-
test. It
- supports this result in that rejecting the null hypothesis would be wrong less
than 12.44%
- significance critical value for the χ2 test can be found in UE, Table B-8, p. 619
to be 2.71.
- of significance so the null hypothesis of no structural change can be rejected.
The critical
- level of the F-test. It supports this result in that rejecting the null
hypothesis would be
- significance so the null hypothesis of no structural change can be rejected.7 The
reported
- rejecting the null hypothesis would be wrong less than 0.1245% of the time.
- 7 The critical value for the χ2 test can be found in UE, Table B-8, p. 619.
- significant, refer to Performing the t-test of the simple correlation coefficient
(UE 5.3.3).
- greater than the 5% critical χ2 value of 11.0704976935, we can reject the null
hypothesis
- probability that you would be incorrect if you rejected the null hypothesis of no
- null hypothesis of no first order serial correlation.
- The null hypothesis of the LM test is that there is no serial correlation up to
lag order p, where p
- Step 5. To determine whether the null hypothesis can be rejected in this case,
determine the critical
- rejected the null hypothesis of no serial correlation up to lag order 1 at the
95% confidence level.
- Null Hypothesis:
- -1.633006 1% Critical Value*
- 5% Critical Value
- 10% Critical Value
- *MacKinnon critical values for rejection of hypothesis of a unit root.
- the MacKinnon critical values.
- 4. Forecasting confidence intervals (UE 15.2.3)
- Forecasting confidence intervals (UE, 15.2.3):
- Step 9. To calculate the upper confidence interval for the 6'1" student, type
the following formula (all
- Double click YF_HIGH in the workfile window to view the upper confidence interval
in the
- Step 10. To calculate the lower confidence interval for the 6'1"student, type the
following formula
- Double click YF_LOW in the workfile window to view the upper confidence interval
in the lower
- a. Follow the steps in Forecasting confidence intervals to calculate the 95%
confidence
- 4. Calculating a confidence interval for a population mean (UE 16.4.6)
- 3. Jarque-Bera test (under the null hypothesis of a normal distribution, the
Jarque-Bera statistic
- null indicates that a small probability value leads to the rejection of the null
hypothesis of a
- distributions. We have already used EViews to calculate the critical t-value for
t-tests (see
- Chapter 5 and Calculating a confidence interval for a population mean) and
generated random
- Calculating a confidence interval for a population mean (UE 16.4.6):
- confidence interval for the population mean of Y1998:
- 2 To compute the 99% confidence interval, substitute .995 for .975 in Step 2 and
Step 3 below.
- Step 2. To calculate the upper confidence interval, type scalar CI_Y1998_HIGH =
- Step 3. To calculate the lower confidence interval, type scalar CI_Y1998_LOW =
@mean(Y1998)-
- we reject the null hypothesis (i.e., Mean = 28.10000). The probability value for
a one-sided
- steps in Calculating a confidence interval for a population mean to calculate the
99%
- confidence interval (check footnote 2). You could also answer this problem by
following the

Time Series
-----------
- generate forecasts at any time. Managing your work is simplified since only a
single object is
- number of specialized functions for automatically handling the leads, lags, and
differences that
- missing observations or is lagged with data not available for the pre-sample
period).
- 2. Lagging variables in an OLS model using EViews (UE 6.5)
- Lagging variables in an OLS model using EViews (UE 6.5):
- lagged variables
- SF in the Forecast name: window, uncheck the two boxes in the Output: window (the
- 2 The Forecast procedure in EViews gives you the option of forecasting the
transformed dependent
- imposed. If the restrictions are valid, there should be little difference in the
two residual
- 1976 in the Enter one date (observation) for the Forecast Test or one or more
dates for the
- First difference
- First difference of the logarithm
- 1 To test for possible second order serial correlation, regress the residuals
against its value lagged one
- To detect seasonal serial correlation in a quarterly model, regress the residuals
against its value lagged four
- serial correlation in a monthly model, regress the residuals against its value
lagged twelve periods enter E C
- below. EViews automatically adjusts your sample to account for the lagged data
used in
- using contemporaneous information, but ignoring the information contained in the
lagged residual. For AR
- forecast errors.
- 1. Estimating ad hoc distributed lag & Koyck distributed lag models (UE 12.1.3)
- 2. Testing for serial correlation in Koyck distributed lag models (UE 12.2.2)
using:
- 2.2. The Lagrangian Multiplier (LM) test
- Estimating an ad hoc distributed lag model (UE 12.1.3):
- Estimating a Koyck distributed lag model (UE 12.1.3):
- Testing for serial correlation in Koyck distributed lag models using Durbin’s h
test (UE
- Testing for serial correlation in Koyck distributed lag models using the
Lagrangian Multiplier
- should already be present in the workfile). To conduct a Lagrangian Multiplier
(LM) test for UE,
- Step 4. Change the number in the Lags to include: to 1 in the Lag Specification:
window.2 Click OK
- Presample missing value lagged residuals set to zero.
- critical χ2(1) value, we can reject the hypothesis of no serial correlation up to
lag order 1 at the
- Granger Causality view, you will first see a dialog box asking for the number of
lags to use in the
- Lags: 3
- Correlogram of: window and enter 16 (the EViews default in this case) in the Lag
Specification:
- lags to include: window, and click OK to reveal the EViews output below.
- 4 In general, it is better to use more rather than fewer lags, since the theory
is couched in terms of the relevance of all
- past information. You should pick a lag length that corresponds to reasonable
beliefs about the longest time over
- 5 The reported F-statistics are the Wald statistics for the joint hypothesis that
the coefficients on the lagged values of
- increasing lag k, it is a
- significantly positive at lag
- Step 4. Four things have to be specified in the Unit Root Test dialog box to
carry out a unit root test.
- process. EViews also reports the Partial Correlations (PAC) in the same window.
The partial correlation at lag k
- partial autocorrelation at lag k will be close to zero. The PAC of a pure
autoregressive process of order k cuts off at
- lag k, while the PAC of a pure moving average (MA) process asymptotes gradually
to zero.
- Perron (PP) test (select ADF for this example).7 Second, specify whether to test
for a unit root in
- practical issues in performing the ADF test. First, you will have to specify the
number of lagged first difference
- ADF tests). The usual (though not particularly useful) advice is to include lags
sufficient to remove any serial
- contains two unit roots and is of integrated order two I(2).
- 9 The output reports the ADF Test Statistic, but in reality, it is the DF test
statistic, since zero lags were chosen.
- previous section and select 1st difference for the Test for unit root in: window
and Intercept in
- difference of CO can be rejected at the 5% but not at the 1% level. This adds to
the evidence
- a. Follow the steps in estimating distributed lag models.
- b. Follow the steps in estimating Koyck lag models.
- Koyck lag models using Durbin’s h test.
- Koyck lag models using the Lagrangian Multiplier (LM) test.
- found in using the Lagrangian Multiplier (LM) test to detect serial correlation
tests in Koyck
- lag models.
- c. In Step 5, change the number in the Lags to include: to 2 in the Lag
Specification:
- enter YDF in the Forecast name: window, and click OK. EViews will create a new
variable in
- Chapter 15: Forecasting
- 6. Forecasting with ARIMA models (UE 15.3)
- order to forecast a variable beyond 1994, the workfile range and sample must be
expanded.
- the Sample range to forecast: to 1951 1997, and click OK.
- Complete the section entitled Forecasting chicken consumption using OLS before
attempting this
- the Sample range to forecast: to 1951 1997, and click OK.
- section entitled Forecasting chicken consumption using OLS before attempting this
section. The
- of: window. Change the Forecast name: to
- range to forecast: is set to 1951 1997, and
- Step 2. Follow Steps 2 & 3 of the section entitled Forecasting chicken
consumption using OLS to
- make sure that the Sample range to forecast: is set to 1 21, and click OK. To
view the forecast
- window and scroll to the bottom. The forecast weight for the 21st observation is
186.2993.
- model objects in EViews and techniques for using these objects to forecast and
perform
- simulations see Help/Contents/Hypothesis Testing and Forecasting/Model Solve
(Forecast
- Forecasting with ARIMA models (UE 15.3):
- component corresponds to using second differences, and so on.
- 3. The third tool is the MA, or moving average term. A moving average
forecasting model uses
- lagged values of the forecast error to improve the current forecast. A first-
order moving
- average term uses the most recent forecast error, a second-order term uses the
forecast error
- In ARIMA forecasting, you assemble a complete forecasting model by using
combinations of the
- Forecasting chicken
- Step 5. Select Forecast on the
- in the Forecast name:
- to forecast: is set to 1998,
- to view the following forecast values for 1995 - 1998:
- forecast of the gross sales volume at the three proposed restaurant sites.
- window, and click OK. Then follow the steps in Forecasting chicken consumption
using
- OLS to make an unconditional forecast of F for 1971-1974, given the numbers
printed in
- Forecasting chicken consumption using OLS to make the Unconditional forecast of
the

Forecasting
-----------
- Step 2. To generate a new variable named predicted, with the data printed in
column (4) of UE,
- Table 1.1, click Genr on the workfile menu and enter the formula
(predicted=103.4+6.38*X) in
- click Genr on the workfile menu and enter the formula (residual=Y-predicted) in
the Enter
- Step 5. Create a group with x, y, predicted, residual, and gainorloss in order.
Click
- in future chapters of this guide.
- 4 Unconditional residuals are the errors that you would observe if you made a
prediction of the value of
- which one of the variables could help predict the other.
- reveal the percentage of correct predictions from the OLS model on the status
line in the lower
- reveal the percentage of correct predictions from the WLS model (0.83 for this
exercise).
- reveal the percentage of correct predictions from the LOG model (0.8 for this
exercise).
- model predicted correctly and 0 if not.
- predictions from the PRO model (0.8 for this exercise).
- group spreadsheet and make sure that it looks like the table below. Note that the
predicted values
- Step 12. Note that the predicted values for YFGLS in the EViews spreadsheet are
slightly different than
- Follow these steps to make a point prediction of the weight of a male who stands
6'1" tall and