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The Wald Tests For Testing Hypotheses: Eco321: Econometrics

The document describes the Wald test, which is used to test hypotheses about parameters estimated by ordinary least squares regression. It provides examples of how to set up and calculate the Wald test statistic to test different hypotheses about the coefficients, including testing whether a single coefficient is equal to zero, whether two coefficients are equal, and whether coefficients are the same between regressions for men and women. The Matlab commands for estimating the regression, calculating the test statistic, and determining whether to reject the null hypothesis are also presented.

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Mehmet Murat Çobanoğlu
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196 views11 pages

The Wald Tests For Testing Hypotheses: Eco321: Econometrics

The document describes the Wald test, which is used to test hypotheses about parameters estimated by ordinary least squares regression. It provides examples of how to set up and calculate the Wald test statistic to test different hypotheses about the coefficients, including testing whether a single coefficient is equal to zero, whether two coefficients are equal, and whether coefficients are the same between regressions for men and women. The Matlab commands for estimating the regression, calculating the test statistic, and determining whether to reject the null hypothesis are also presented.

Uploaded by

Mehmet Murat Çobanoğlu
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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The Wald Test

The Wald Tests for Testing Hypotheses


Eco321: Econometrics
Donghwan Kim Department of Economics SUNY at Stony Brook

Spring 2005

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

An Example: The Determinants of Wage

The Econometric Model


log(Wage) = 0 + 1 Age + 2 Education + 3 Female +

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

Matlab Commands
The dependent and explanatory variables
open dataset data = csvread(wages2.csv) ;
%

Working People data = data (data(:,10)>0, :);


%

Depedent Variable: Wage y = data(:,10) ; LogWage = log(y) ;


%

Explanatory Variables Age = data(:,3) ; Education = data(:,5) ; Female = data(:,6) ; X = [Age Education Female];
%

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

Matlab Commands

Estimation by OLS
Regress LogWage on X Out = regstats (LogWage, X, linear) ;
%

betahat and varaince-covariance matrix betahat = Out.beta ; Var = Out.covb ;


%

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test


Testing Hypothesis

H0 : R = r where R is a q k matrix

The Test Statistic

W = (R r ) [RVar ()R ]1 (R r ) 2 q

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test


Example 1
H0 : 2 = 0

0 0
R

0 1 2 = 3

0
r

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test


Matlab Commands
R and r matrices R = [0 0 1 0] ; r = 0 ;
%

The Wald test statistic di = R*betahat - r ; Vdi = R*Var*R ; W=di*inv(Vdi)*di ;


%

The rejection region df = size(R,1); alpha = 0.05 ; Reject = chi2inv(1-alpha, df);


%

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test

Example 2
H0 : 2 = 3

0 1 1 0

0 1 2 = 3

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test

Example 3
H0 : 1 = 0 and 2 = 0

0 0 1 0 0 1 0 0

0 1 2 = 3

0 0

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test


Test for structural change
For Men: log(WageM ) = XM M + For Women: log(WageW ) = XW W +
W M

Testing Hypothesis
H0 : M = W where M and W are k 1 matrices

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

The Wald Test

The Wald Test

Divide the whole sample into mens and womens samples. Run Regressions, separately. Find , Var ( ) and , Var ( ) M M W W

The Test Statistic


a W = ( ) [Var ( ) + Var ( )]1 ( ) 2 M W M W M W k

See the Professors class handout, Comparing Womens and Mens Wage Regressions, on Blackboard.

Eco321: Econometrics The Wald Tests for Testing Hypotheses

Donghwan KimDepartment of Economics SUNY at Stony Brook

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