Essentials of econometrics, 4th ed.

Abstract

OBJECTIVE OF THE BOOK As in the previous editions, the primary objective of the fourth edition of Essentials of Econometrics is to provide a user-friendly introduction to econometric theory and techniques. The intended audience is undergraduate economics majors, undergraduate business administration majors, MBA students, and others in social and behavioral sciences where econometrics techniques, especially the techniques of linear regression analysis, are used. The book is designed to help students understand econometric techniques through extensive examples, careful explanations, and a wide variety of problem material. In each of the previous editions, I have tried to incorporate major developments in the field in an intuitive and informative way without resorting to matrix algebra, calculus, or statistics beyond the introductory level. The fourth edition continues that tradition. Although I am in the eighth decade of my life, I have not lost my love for econometrics and I strive to keep up with the major developments in the field. To assist me in this endeavor, I am now happy to have Dr. Dawn Porter, Assistant Professor of Statistics at the Marshall School of Business at the University of Southern California in Los Angeles, as my co-author. Both of us have been deeply involved in bringing the fourth edition of Essentials of Econometrics to fruition. MAJOR FEATURES OF THE FOURTH EDITION Before discussing the specific changes in the various chapters, the following. SPECIFIC CHANGES Some of the chapter-specific changes in the fourth edition are as follows: Chapter 1: A revised and expanded list of Web sites for economic data has been included. Chapters 2 and 3: An interesting new data example concerning the relationship between family income and student performance on the S.A.T. is utilized to introduce the two-variable regression model. Chapter 4: We have included a brief explanation of nonstochastic versus stochastic predictors. An additional example regarding educational expenditures among several countries that adds to the explanation of regression hypothesis testing. Chapter 5: The math S.A.T. example is revisited to illustrate various functional forms. Section 5.10 has been added to handle the topic of regression on standardized variables. Also, several new data exercises have been included. Chapter 6: An example concerning acceptance rates among top business schools has been added to help illustrate the usefulness of dummy variable regression models. Several new data exercises also have been added. Chapter 8: Again, we have added several new, updated data exercises dealing with the issue of multicollinearity. Chapter 9: To illustrate the concept of heteroscedasticity, a new example relating wages to education levels and years of experience has been included, as well as more real data exercises. Chapter 10: A new section concerning the Newey-West standard error correction method using a data example has been added. Also, a new appendix has been included at the end of the chapter to cover the Breusch-Godfrey test of autocorrelation. Chapter 12: An expanded treatment of logistic regression has been included in this chapter with new examples to illustrate the results. Appendixes A–D: As noted above, the material in these appendixes was formerly contained in Chapters 2–5 of the main text. By placing them in the back of the book, they can more easily serve as reference sections to the main text. Data examples have been updated, and new exercises have been added. features of the new edition are worth noting: 1. In order to streamline topics and jump right into information about linear regression techniques, we have moved the background statistics material (formerly Chapters 2 through 5) to the appendix. This allows for easy reference to more introductory material for those who need it, without disturbing the main content of the text. 2. Practically all the data used in the illustrative examples have been updated from the previous edition. 3. Several new examples have been added. xix 4. In several chapters, we have included extended concluding examples that illustrate the various points made in the text. 5. Concrete computer printouts of several examples are included in the book. Most of these results are based on EViews (version 6), STATA (version 10), and MINITAB (version 15). 6. Several new diagrams and graphs are included in various chapters. 7. Several new data-based exercises are included throughout the book. 8. Small-sized data are included in the book, but large sample data are posted on the book’s Web site, thereby minimizing the size of the text. The Web site also contains all the data used in the book.