Abinomial probability model is to be based on the following index function model: y?? = +
Question:
Abinomial probability model is to be based on the following index function model:
y?? = α + βd + ε,
y = 1, if y?? > 0,
y = 0 otherwise.
The only regressor, d, is a dummy variable. The data consist of 100 observations that have the following:
Obtain the maximum likelihood estimators of α and β, and estimate the asymptotic standard errors of your estimates. Test the hypothesis that β equals zero by using a Wald test (asymptotic t test) and a likelihood ratio test. Use the probit model and then repeat, using the logit model. Do your results change?
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The log likelihood is where ij indicates the sum over observations for which y i and d j Since there are no other regressors this reduces to ln L 24ln1 F 32ln1 F 28ln F 16ln F Although it is straightf...View the full answer
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