Confidence intervals provide a range of values where the true coefficient is likely to lie from "summary" of Introduction to Econometrics by Christopher Dougherty
Confidence intervals are a fundamental tool in econometrics that allows us to establish a range within which the true coefficient is likely to fall. This range provides a measure of uncertainty around the estimated coefficient, taking into account the variability inherent in sample data. The width of the confidence interval depends on the level of confidence chosen, with higher confidence levels resulting in wider intervals. When estimating coefficients in econometric models, it is crucial to recognize that the estimated coefficient is just an approximation of the true coefficient. By constructing confidence intervals, we acknowledge this uncertainty and provide a more nuanced interpretation of our results. In other words, we are not claiming that the estimated coefficient is the exact value of the true coefficient, but rather that it is likely to fall within a certain range. The proc...Similar Posts
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