Economics Asked on April 5, 2021
I have a question that contains a list of parameter estimates and their related standard errors. It then goes on to ask that I explain how I know all parameter estimates are statistically significant at a 5% significance level, but without performing any ‘sophisticated calculations’. Does this mean I have to compare the standard errors to the estimators or do I find their t-values?
Normally an exam question like that can be solved by simply calculating the $t$-statistics which can be simply done as:
$$t_{hat{beta}} = frac{hat{beta}-beta_0}{se(hat{beta})}$$
where $hat{beta}$ is the estimate, $beta_0$ is the assumed value of beta under null (usually 0) and $se(hat{beta})$ standard error of the coefficient and then compare it to $5%$ critical value (for large $n$ and two sided hypothesis approximately $1.96$).
However, you should ask your teacher/supervisor to clarify what is considered 'sophisticated calculation' - some might consider even subtraction and division sophisticated. An approximate rule of thumb that requires even less calculation is to see if the coefficient $hat{beta}$ (and assuming null hypothesis assumes $beta_0=0$) is twice as large as the standard error.
Answered by 1muflon1 on April 5, 2021
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