Learn about fixed effects regressions.
- [Instructor] Regression analysis is a great tool…for making forecasts and predictions.…But, it's not perfect.…In particular, there's a number of problems…that often come up with regression analysis.…And one of the most pernicious problems…is what we call omitted variables,…or omitted variables bias.…In particular, what sometimes happens…is that we lack data on one factor…that might impact the variable we're trying to predict.…Recall our friend Ed, who is looking at predicting…the value of a commercial property building.…
One thing that might impact…that commercial property building is a zoning change.…If the building Ed is looking at has historically…been zoned as a commercial property,…but the town's zoning committee has recently re-zoned…the property for a landfill,…that's probably going to have an impact on valuation, right?…Just makes sense.…We lack data on zoning changes.…Now, in some cases, we can try and deal…with the omitted variables problems…by looking at gathering additional data.…
For example, data on zoning changes…
Professor Michael McDonald demonstrates how to harness the wealth of information available on the Internet to forecast statistics such as industry growth, GDP, and unemployment rates, as well as factors that directly affect your business, like property prices and future interest rate hikes. All you need is Microsoft Excel. Michael uses the built-in formulas, functions, and calculations to perform regression analysis, calculate confidence intervals, and stress test your results. He also covers time series exponential smoothing, fixed effects regression, and difference estimators. You'll walk away from the course able to immediately begin creating forecasts for your own business needs.
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- Identify a good source of free data.
- Name the term for the estimate of the impact of an X variable on a Y variable.
- Tell which statistic offers a bounds on the estimate of the impact of an X variable on a Y variable.
- Assess the type of variable that can be used to capture fixed effects.
- Cite the method by which a forecast can be done with a regression.