Archive for the ‘Econometrics’ Category

Generalized Hyperbolic Distributions

March 22, 2008

I came across short paper by Stefan Jaschke that describes different modeling choices for stock returns (which famously have fat tails). The paper suggests generalized hyperbolic distributions as a possibility.

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Making the Most of Statistical Analyses

December 10, 2007

While looking for something completely unrelated, I came across this political science paper, Making the Most of Statistical Analyses: Improving Interpretation and Presentation, by King, Tomz, and Wittenberg, which advocates an interesting approach for presenting the results of models. Rather than reporting just coefficient estimates, they recommend reporting the marginal effect of a change in the independent variable on the dependent variable. For a linear model, this the same as reporting the coefficient, and for a probit model this is the marginal change in probability that some people report. In addition to reporting standard errors, they recommend reporting the confidence interval of the marginal effect to as a measure of statistical significance.

What’s nice about this approach is that it gives you a quick read on both economic, and statistical significance. They give an example of what they would report: “Other things being equal, an additional year of education would increase your annual income by $1,500 on average, plus or minus $500.” They explain how to use Monte Carlo simulations to derive this kind of information from non-linear models.