Application to the California Test Score example Test score 720 700 TestScore = 698.9 -2.28 X STR 680 660 640 620 600 10 15 20 25 30 Student-teacher ratio 0.05, Estimated Test Score = 698.9 -2.28% STR, R2 SER= 18.6 STR explains only a small fraction of the variation in test scores Does this make sense? Does this mean the STR is unimportant in a policy sense? MFIN6201 - Empirical Techniques and Applications in Finance 21 Application to the California Test Score example Test score 720 700 TestScore = 698.9 -2.28 X STR 680 660 640 620 600 10 15 20 25 30 Student-teacher ratio 0.05, Estimated Test Score = 698.9 -2.28% STR, R2 SER= 18.6 STR explains only a small fraction of the variation in test scores Does this make sense? Does this mean the STR is unimportant in a policy sense? MFIN6201 - Empirical Techniques and Applications in Finance 21