DATA ANALYSIS

GSF 6011 & GSF 7011 Research Methodology Seminar

Centre for Graduate Studies

Universiti Malaysia Sarawak (UNIMAS)

05 April 2018

Facilitator:
Dr Jerome Kueh
(PhD in Economics, University of Wisconsin – Milwaukee, USA)
Faculty of Economics and Business
Universiti Malaysia Sarawak
OUTLINE

1. Preface of Data Analysis

2. Interpretation of Regression
3. Hypothesis Testing & Decision Rule
4. Time-series/Panel Data Analysis
5. Q & A
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 Preface of Data Analysis

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 Basic Data Analysis
Descriptive Analysis
 Describes the basic characteristics such as central tendency,
distribution, and variability.

Histogram
 A graphical way of showing a frequency distribution in which the height
of a bar corresponds to the observed frequency of the category.

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Dr Jerome Kueh
 Basic Data Analysis - Examples

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 Basic Data Analysis - Examples

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 Basic Data Analysis - Examples

Frequency Table Example

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 Basic Data Analysis - Examples
Cross-Tabulation Tables from a Survey Regarding AIG and Government Bailouts

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Computer Drawn Box and Whisker Plot

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 Univariate Statistical: Choice Made Easy

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 Regression model

𝑌𝑖 = 𝛽0 + 𝛽1 𝑋1𝑖 + 𝛽2 𝑋2𝑖 + 𝑢𝑖 Cross-sectional Analysis

𝑌𝑡 = 𝛽0 + 𝛽1 𝑋1𝑡 + 𝛽2 𝑋2𝑡 + 𝑢𝑡 Time Series Analysis

𝑌𝑖𝑡 = 𝛽0 + 𝛽1 𝑋1𝑖𝑡 + 𝛽2 𝑋2𝑖𝑡 + 𝑢𝑖𝑡 Panel Data Analysis

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 Interpretation of Results

𝐿𝑌𝑡 = 𝛼+ β𝐿𝑋𝑡 + 𝑢𝑡

Notes:
S = Significant
S = Sign
S = Size

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Dr Jerome Kueh
 Hypothesis Testing & Decision Rule

Take note:
 Identify the null hypothesis and alternative hypothesis.

 Identify decision rule approaches.

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 Decision Rule – Critical Values Approach
Left Tailed Test
H0: parameter < value

Decision Rule: Reject H0 if t-stat. < c.v.

Right Tailed Test

H0: parameter > value

Decision Rule: Reject H0 if t-stat. > c.v

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 Decision Rule – Critical Values Approach

Two Tailed Test

H0: parameter not equal value

Decision Rule: Reject H0

if t-stat. < c.v. (left) or t-stat. > c.v. (right)

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 Decision Rule – p-value Approach
Significance Levels Decision Rule
0.10 If p-value < sig level, Reject H0
If p-value > sig level, Do not Reject H0

0.05 If p-value < sig level, Reject H0

If p-value > sig level, Do not Reject H0

0.01 If p-value < sig level, Reject H0

If p-value > sig level, Do not Reject H0
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 Data Analysis - Examples

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 Data Analysis - Examples
F Test for Overall Significance

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 Data Analysis - Examples
t-test for Significance of Individual Parameters

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Data Analysis - Examples
 Time Series Approach

Stationary at Stationary at 1st

Stationary at Stationary at difference & 2nd
I(0), I(1) or I(0)
level 1st difference difference
& I(1)

Simple Co-
Regression ARDL Autoregressive
integration

Unrestricted
ECM/VECM
VAR

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Dr Jerome Kueh
Dr Jerome Kueh
 Unit Root Test
Null Hypothesis: LY has a unit root Null Hypothesis: D(LY) has a unit root
Exogenous: Constant, Linear Trend Exogenous: Constant
Lag Length: 1 (Automatic - based on SIC, maxlag=8) Lag Length: 0 (Automatic - based on SIC, maxlag=8)

t-Statistic Prob.* t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -3.355504 0.0756 Augmented Dickey-Fuller test statistic -4.595127 0.0009
Test critical values: 1% level -4.273277 Test critical values: 1% level -3.653730
5% level -3.557759 5% level -2.957110
10% level -3.212361 10% level -2.617434

*MacKinnon (1996) one-sided p-values. *MacKinnon (1996) one-sided p-values.

Null Hypothesis: LY has a unit root Null Hypothesis: D(LY) has a unit root
Exogenous: Constant, Linear Trend Exogenous: Constant
Bandwidth: 3 (Newey-West automatic) using Bartlett kernel Bandwidth: 1 (Newey-West automatic) using Bartlett kernel

Adj. t-Stat Prob.* Adj. t-Stat Prob.*

Phillips-Perron test statistic -2.618729 0.2750 Phillips-Perron test statistic -4.604401 0.0009
Test critical values: 1% level -4.262735 Test critical values: 1% level -3.653730
5% level -3.552973 5% level -2.957110
10% level -3.209642 10% level -2.617434

*MacKinnon (1996) one-sided p-values. *MacKinnon (1996) one-sided p-values.

Null Hypothesis: LY is stationary Null Hypothesis: D(LY) is stationary

Exogenous: Constant, Linear Trend Exogenous: Constant
Bandwidth: 4 (Newey-West automatic) using Bartlett kernel Bandwidth: 1 (Newey-West automatic) using Bartlett kernel

LM-Stat. LM-Stat.

Kwiatkowski-Phillips-Schmidt-Shin test statistic 0.15213... Kwiatkowski-Phillips-Schmidt-Shin test statistic 0.31165...

Asymptotic critical values*: 1% level 0.21600... Asymptotic critical values*: 1% level 0.73900...
5% level 0.14600... 5% level 0.46300...
10% level 0.11900... 10% level 0.34700...
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*Kwiatkowski-Phillips-Schmidt-Shin (1992, Table 1) *Kwiatkowski-Phillips-Schmidt-Shin (1992, Table 1)
 Cointegration Test
Date: 11/20/17 Time: 22:03
Sample (adjusted): 1978 2008
Included observations: 31 after adjustments
Trend assumption: Linear deterministic trend
Series: LY LX1 LX2
Lags interval (in first differences): 1 to 2

Unrestricted Cointegration Rank Test (Trace)

Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.582031 40.11966 29.79707 0.0023

At most 1 0.285064 13.07684 15.49471 0.1120
At most 2 0.082654 2.674396 3.841466 0.1020

Trace test indicates 1 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.582031 27.04282 21.13162 0.0065

At most 1 0.285064 10.40245 14.26460 0.1868
At most 2 0.082654 2.674396 3.841466 0.1020

Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
 Vector Error Correction Estimates
𝑚 𝑛 𝑜

∆𝐿𝑌𝑡 = 𝛼0 + 𝛽1 ∆𝐿𝑌𝑡−1 + 𝛽2 ∆𝐿𝑋1𝑡−1 + 𝛽3 ∆𝐿𝑋2𝑡−1 + 𝛿𝑗 𝐸𝐶𝑇𝑡−1 + 𝜀𝑡

𝑖=1 𝑖=1 𝑖=1
Vector Error Correction Estimates
Date: 11/20/17 Time: 22:05
Sample (adjusted): 1978 2008
Included observations: 31 after adjustments
Standard errors in ( ) & t-statistics in [ ]

Cointegrating Eq: CointEq1

LY(-1) 1.000000

LX1(-1) 1.053790
(0.26053)
[ 4.04484]

LX2(-1) -2.011021
(0.28287)
[-7.10937]

C -3.629727

Error Correction: D(LY) D(LX1) D(LX2)

CointEq1 0.068150 -0.456954 -0.001715

(0.05649) (0.09817) (0.09952)
[ 1.20647] [-4.65492] [-0.01724]
VEC Granger Causality/Block Exogeneity Wald Tests
Date: 11/20/17 Time: 22:18
Sample: 1975 2008
Included observations: 31

Dependent variable: D(LY)

Excluded Chi-sq df Prob.

D(LX1) 3.444679 2 0.1786

D(LX2) 18.66898 2 0.0001

All 21.81999 4 0.0002

Dependent variable: D(LX1)

Excluded Chi-sq df Prob.

D(LY) 26.76962 2 0.0000

D(LX2) 12.57542 2 0.0019

All 26.92128 4 0.0000

Dependent variable: D(LX2)

Excluded Chi-sq df Prob.

D(LY) 5.959173 2 0.0508

D(LX1) 1.965973 2 0.3742

All 7.695173 4 0.1034

 Granger Causality under VECM
Dependent ∆Y ∆X1 ∆X2 ECT
variable
𝒙𝟐 statistics Coefficient t-statistic
∆Y - 3.445(0.1786) 18.669(0.000)*** 0.0682 1.2065

∆X1 26.7696(0.000)*** - 12.5754(0.002)*** -0.4569*** -4.6549

∆X2 5.9592(0.051)* 1.9659(0.3742) - -0.0017 -0.0172

Notes: The χ² - statistic tests the joint significance of the lagged values of the independent variables, and
the significance of the error correction term(s); figures in the parentheses are the p-values; ∆ is the first
difference operator; ** denotes statistically significant at 5 percent level

X1 X2
 Diagnostic Test
VEC Residual Normality Tests
Orthogonalization: Cholesky (Lutkepohl) VEC Residual Serial Correlation LM Te...
Null Hypothesis: residuals are multivariate normal Null Hypothesis: no serial correlation at...
Date: 11/20/17 Time: 22:09 Date: 11/20/17 Time: 22:13
Sample: 1975 2008 Sample: 1975 2008
Included observations: 31
Included observations: 31

Component Skewness Chi-sq df Prob. Lags LM-Stat Prob

1 -0.089803 0.041667 1 0.8383 1 13.54802 0.1393

2 0.246592 0.314172 1 0.5751 2 16.56674 0.0559
3 -0.100069 0.051737 1 0.8201 3 23.36061 0.0054

Joint 0.407576 3 0.9387 Probs from chi-square with 9 df.

Component Kurtosis Chi-sq df Prob.

1 2.913279 0.009714 1 0.9215

2 2.240748 0.744599 1 0.3882
3 3.877294 0.994126 1 0.3187

Joint 1.748438 3 0.6262

Component Jarque-Bera df Prob. VEC Residual Heteroskedasticity Tests: No Cross Terms (only levels and squares)
Date: 11/20/17 Time: 22:13
1 0.051381 2 0.9746 Sample: 1975 2008
2 1.058771 2 0.5890 Included observations: 31
3 1.045863 2 0.5928
Joint test:
Joint 2.156015 6 0.9048
Chi-sq df Prob.

96.11633 84 0.1725
Diagnostic Test: Example
 Panel Data Approach

Micro Panel Macro Panel

 Pooled OLS  Panel Unit Root Test
 Static Model: FEM & REM  Panel Cointegration
 Dynamic Model: GMM  FMOLS/DOLS/PMG

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 Panel Data Model
Pooled OLS

Fixed Effects
Least Square Dummy Variables
Within estimator

Random Effects

′
𝑦𝑖𝑡 = 𝛼 + 𝑥𝑖𝑡 + 𝑢𝑖 + 𝜆𝑡 + 𝑣𝑖𝑡
Panel Data Model
 Panel Data Selection

POLS vs RE BP-LM Test

FE vs RE Hausman Test
 Panel Unit Root Tests

1st Generation
LLC (2002) Im, Pesaran & Shin (2002)
Hadri (2000) Choi (2001)
Breitung (2000) Maddala & Wu (1999)

2nd Generation
Breitung & Das (2005)
Bai & Ng (2004)
Pesaran (2003)
Panel Unit Root Tests: Example
 Panel Cointegration

There are few cointegration tests developed in panel data

Kao (1999) Test
Larsson et al. (2001) Test
Pedroni (2000, 2004) Test
Panel Cointegration: Example
 MG and PMG Estimators
 Autoregressive distributive lag (ARDL) (p, q1, . . . , qk)
dynamic panel specification of the form.
MG and PMG Estimators: Example
Thank you