|
154
Part One
Single-Equation Regression Models
6.2
Scaling and Units of Measurement
To grasp the ideas developed in this section, consider the data given in Table 6.2, which
refers to U.S. gross private domestic investment (GPDI) and gross domestic product (GDP),
in billions as well as millions of (chained) 2000 dollars.
Suppose in the regression of GPDI on GDP one researcher uses data in billions of dol-
lars but another expresses data in millions of dollars. Will the regression results be the same
in both cases? If not, which results should one use? In short, do the units in which the
regressand and regressor(s) are measured make any difference in the regression results? If
so, what is the sensible course to follow in choosing units of measurement for regression
analysis? To answer these questions, let us proceed systematically. Let
Y
i
= ˆ
β
1
+ ˆ
β
2
X
i
+ ˆ
u
i
(6.2.1)
where
Y
=
GPDI and
X
=
GDP. Define
Y
∗
i
=
w
1
Y
i
(6.2.2)
X
∗
i
=
w
2
X
i
(6.2.3)
where
w
1
and
w
2
are constants, called the
scale factors;
w
1
may equal
w
2
or be different.
From Equations 6.2.2 and 6.2.3 it is clear that
Y
∗
i
and
X
∗
i
are
rescaled Y
i
and
X
i
. Thus,
if
Y
i
and
X
i
are measured in billions of dollars and one wants to express them in millions
of dollars, we will have
Y
∗
i
=
1000
Y
i
and
X
∗
i
=
1000
X
i
; here
w
1
=
w
2
=
1000.
Now consider the regression using
Y
∗
i
and
X
∗
i
variables:
Y
∗
i
= ˆ
β
∗
1
+ ˆ
β
∗
2
X
∗
i
+ ˆ
u
∗
i
(6.2.4)
where
Y
∗
i
=
w
1
Y
i
,
X
∗
i
=
w
2
X
i
, and
ˆ
u
∗
i
=
w
1
ˆ
u
i
. (Why?)
TABLE 6.2
Gross Private
Domestic Investment
and GDP, United
States, 1990–2005
(Billions of chained
[2000] dollars, except
as noted; quarterly
data at seasonally
adjusted annual
rates)
Year
GPDIBL
GPDIM
GDPB
GDPM
1990
886.6
886,600.0
7,112.5
7,112,500.0
1991
829.1
829,100.0
7,100.5
7,100,500.0
1992
878.3
878,300.0
7,336.6
7,336,600.0
1993
953.5
953,500.0
7,532.7
7,532,700.0
1994
1,042.3
1,042,300.0
7,835.5
7,835,500.0
1995
1,109.6
1,109,600.0
8,031.7
8,031,700.0
1996
1,209.2
1,209,200.0
8,328.9
8,328,900.0
1997
1,320.6
1,320,600.0
8,703.5
8,703,500.0
1998
1,455.0
1,455,000.0
9,066.9
9,066,900.0
1999
1,576.3
1,576,300.0
9,470.3
9,470,300.0
2000
1,679.0
1,679,000.0
9,817.0
9,817,000.0
2001
1,629.4
1,629,400.0
9,890.7
9,890,700.0
2002
1,544.6
1,544,600.0
10,048.8
10,048,800.0
2003
1,596.9
1,596,900.0
10,301.0
10,301,000.0
2004
1,713.9
1,713,900.0
10,703.5
10,703,500.0
2005
1,842.0
1,842,000.0
11,048.6
11,048,600.0
Note:
GPDIBL
=
gross private domestic investment, billions of 2000 dollars.
GPDIM
=
gross private domestic investments, millions of 2000 dollars.
GDPB
=
gross domestic product, billions of 2000 dollars.
GDPM
=
gross domestic product, millions of 2000 dollars.
Source:
Economic Report
of the President,
2007,
Table B-2, p. 328.
guj75772_ch06.qxd 07/08/2008 07:00 PM Page 154
Chapter 6
Extensions of the Two-Variable Linear Regression Model
155
We want to find out the relationships between the following pairs:
1.
ˆ
β
1
and
ˆ
β
∗
1
2.
ˆ
β
2
and
ˆ
β
∗
2
3. var (
ˆ
β
1
) and var (
ˆ
β
∗
1
)
4. var (
ˆ
β
2
) and var (
ˆ
β
∗
2
)
5.
ˆ
σ
2
and
ˆ
σ
∗
2
6.
r
2
x y
and
r
2
x
∗
y
∗
From least-squares theory we know (see Chapter 3) that
ˆ
β
1
= ¯
Y
− ˆ
β
2
¯
X
(6.2.5)
ˆ
β
2
=
x
i
y
i
x
2
i
(6.2.6)
var (
ˆ
β
1
)
=
X
2
i
n
x
2
i
·
σ
2
(6.2.7)
var (
ˆ
β
2
)
=
σ
2
x
2
i
(6.2.8)
ˆ
σ
2
=
ˆ
u
2
i
n
−
2
(6.2.9)
Applying the OLS method to Equation 6.2.4, we obtain similarly
ˆ
β
∗
1
= ¯
Y
∗
− ˆ
β
∗
2
¯
X
∗
(6.2.10)
ˆ
β
∗
2
=
x
∗
i
y
∗
i
x
∗
2
i
(6.2.11)
var (
ˆ
β
∗
1
)
=
X
∗
2
i
n
x
∗
2
i
·
σ
∗
2
(6.2.12)
var (
ˆ
β
∗
2
)
=
σ
∗
2
x
∗
2
i
(6.2.13)
ˆ
σ
∗
2
=
ˆ
u
∗
2
i
(
n
−
2)
(6.2.14)
From these results it is easy to establish relationships between the two sets of parameter
estimates. All that one has to do is recall these definitional relationships:
Y
∗
i
=
w
1
Y
i
(or
y
∗
i
=
w
1
y
i
);
X
∗
i
=
w
2
X
i
(or
x
∗
i
=
w
2
x
i
);
ˆ
u
∗
i
=
w
1
ˆ
u
i
; ¯
Y
∗
=
w
1
¯
Y
; and
¯
X
∗
=
w
2
¯
X
.
Making
use of these definitions, the reader can easily verify that
ˆ
β
∗
2
=
w
1
w
2
ˆ
β
2
(6.2.15)
ˆ
β
∗
1
=
w
1
ˆ
β
1
(6.2.16)
ˆ
σ
∗
2
=
w
2
1
ˆ
σ
2
(6.2.17)
var (
ˆ
β
∗
1
)
=
w
2
1
var (
ˆ
β
1
)
(6.2.18)
guj75772_ch06.qxd 07/08/2008 07:00 PM Page 155
156
Part One
Single-Equation Regression Models
var (
ˆ
β
∗
2
)
=
w
1
w
2
2
var (
ˆ
β
2
)
(6.2.19)
r
2
x y
=
r
2
x
∗
y
∗
(6.2.20)
From the preceding results it should be clear that, given the regression results based on
one scale of measurement, one can derive the results based on another scale of measure-
ment once the scaling factors, the
w
’s, are known. In practice, though, one should choose
the units of measurement sensibly; there is little point in carrying all those zeros in
expressing numbers in millions or billions of dollars.
From the results given in (6.2.15) through (6.2.20) one can easily derive some special
cases. For instance, if
w
1
=
w
2
, that is, the scaling factors are identical, the slope coefficient
and its standard error remain unaffected in going from the (
Y
i
,
X
i
) to the (
Y
∗
i
,
X
∗
i
) scale,
which should be intuitively clear. However, the intercept and its standard error are both mul-
tiplied by
w
1
.
But if the
X
scale is not changed (i.e.,
w
2
=
1) and the
Y
scale is changed by
the factor
w
1
, the slope as well as the intercept coefficients and their respective standard
errors are all multiplied by the same
w
1
factor. Finally, if the
Y
scale remains unchanged (i.e.,
w
1
=
1) but the
X
scale is changed by the factor
w
2
, the slope coefficient and its standard
error are multiplied by the factor (1
/
w
2
) but the intercept coefficient and its standard error
remain unaffected.
It should, however, be noted that the transformation from the (
Y
,
X
) to the (
Y
∗
,
X
∗
) scale
does not affect the properties of the OLS estimators discussed in the preceding chapters.
EXAMPLE 6.2
The Relationship
between the
GDPI and GDP,
United States,
1990–2005
To substantiate the preceding theoretical results, let us return to the data given in
Table 6.2 and examine the following results (numbers in parentheses are the estimated
standard errors).
Both GPDI and GDP in billions of dollars:
GPDI
t
= −
926.090
+
0.2535 GDP
t
se
=
(116.358) (0.0129)
r
2
=
0.9648
(6.2.21)
Both GPDI and GDP in millions of dollars:
GPDI
t
= −
926,090
+
0
.
2535 GDP
t
se
=
(116,358) (0.0129)
r
2
=
0.9648
(6.2.22)
Notice that the intercept as well as its standard error is 1000 times the corresponding val-
ues in the regression (6.2.21) (note that
w
1
= 1000 in going from billions to millions of
dollars), but the slope coefficient as well as its standard error is unchanged, in accordance
with the theory.
GPDI in billions of dollars and GDP in millions of dollars:
GPDI
t
= −
926
.
090
+
0
.
0002535 GDP
t
se
=
(116.358) (0.0000129)
r
2
=
0.9648
(6.2.23)
As expected, the slope coefficient as well as its standard error is 1
/
1000 its value in
Eq. (6.2.21), since only the
X
, or GDP, scale is changed.
GPDI in millions of dollars and GDP in billions of dollars:
GPDI
t
= −
926,090
+
253
.
524 GDP
t
se
=
(116,358.7) (12.9465)
r
2
=
0.9648
(6.2.24)
guj75772_ch06.qxd 07/08/2008 07:00 PM Page 156
Chapter 6
Extensions of the Two-Variable Linear Regression Model
Do'stlaringiz bilan baham: |
