1. GRA 6020 Multivariate Statistics The regression model OLS Regression Ulf H. Olsson Professor of Statistics

2. Ulf H. Olsson Variance, Covariance and Correlation

3. Ulf H. Olsson Covariance Matrix; Correlation Matrix

4. Ulf H. Olsson Regression Analysis

5. Ulf H. Olsson Regression analysis OLS Regression parameter St.error T-value P-value Confidence interval R-sq R-sq.adj F-value The error term

6. Ulf H. Olsson Regression Analysis The error term has constant variance The error term follows a normal distribution with expectation equal to zero The x-variables are independent of the error term The x-variables are linearly independent The dependent variable is normally distributed

7. Ulf H. Olsson Econometric Model Klein’s Model (1950 )

8. Ulf H. Olsson Making Numbers (OLS and TSLS) CT = 16.237+0.193*PT+0.0899*PT_1+0.796*WT, R² = 0.981 (1.303) (0.0912) (0.0906) (0.0399) 12.464 2.115 0.992 19.933 CT = 15.324+0.0763*PT+0.186*PT_1+0.828*WT, R² = 0.979 (1.453) (0.138) (0.146) (0.0439) 10.546 0.553 1.275 18.844

9. Ulf H. Olsson Assignment You need the LISREL software USE the File: NPV.PSF 1) Do a data screening. Do the variables “follow” a normal distribution? 2) Estimate the sample covariance- and correlation matrix