Category: Econometrics

The Basics of Quantile Regression

Introduction Classical linear regression estimates the mean response of the dependent variable dependent on the independent variables. There are many cases, such as skewed data, multimodal data, or data with outliers, when the behavior at the conditional mean fails to fully capture the patterns in the data. In these cases, quantile regression provides a useful [...]

Basic Bootstrapping in GAUSS

Introduction The bootstrap is a commonly used resampling technique which involves taking random samples with replacement to quantify uncertainty about a particular estimator or statistic. Goals In this post, we will apply the bootstrap procedure to asset returns. Our data will be annual returns from the S&P 500 and the 10 year US Treasury Bond [...]

Permutation Entropy

Introduction Permutation Entropy (PE) is a robust time series tool which provides a quantification measure of the complexity of a dynamic system by capturing the order relations between values of a time series and extracting a probability distribution of the ordinal patterns (see Henry and Judge, 2018). Among its main features, the PE approach: Is [...]

Apples to Apples: The case for cluster-robust standard errors

Introduction Linear regression commonly assumes that the error terms of a model are independently and identically distributed (i.i.d). However, when datasets contain groups, the potential for correlated error terms within groups arises. Example: Weather shocks to apple orchards For example, consider a model of the supply of apples from various orchards across the United States. [...]

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