Wednesday, March 25, 2009


Back in February 2007 I blogged about the history of Student's t-test under the heading Guinness is good for you!.

If you want to read a fuller (and more authoratative) piece on it you can do so in the Fall 2008 issue of the Journal of Economic Perspectives, in which there is an article by Stephen T Ziliak with the title Guinessometrics: The Economic Foundation of "Student's " t

Tuesday, March 24, 2009

Heteroskedasticity blues

Well I woke up this morning
Econometric model on my mind
So I got myself some data
To see what I could find

Then I booted up my computer
And loaded up EViews
I ran a few regressions
But here comes the bad news

I got those old
heteroskedasticity blues
You can see from my diagnostics
I got those old heteroskedasticity blues

I tried logarithmic transforms
Expressed everything per head
Even interactive dummies
Everything the textbook said
And the pattern wasn't clear enough
For weighted least squares instead
I was tearing all the hair out
From my poor old achin' head

I got those old
heteroskedasticity blues
Yes you can see from my diagnostics
I got those old heteroskedasticity blues

But then I got to thinking
Everything's gonna be all right
I'll just follow the procedure
Of Professor Halbert White
Get robust standard errors
It's an option you can choose
'Cos it takes away the terror
Of t stats you can't use

Now they're gone
Those old heteroskedasticity blues
There's no need to be disheartened
By those old heteroskedasticity blues

Wednesday, March 11, 2009

Quantitative easing

The following is not about econometrics at all, but due to the fact that a poem of mine about econometrics posted here has been picked up by the Freakonomics column on the New York Times website, I was encouraged by my one of my colleagues to write another one. The challenge was to write a poem about "quantitative easing" - here it is!

Quantitative easing
Is not very pleasing
But I guess it's just what has to be done.

'Cos when your tummy's bunged up
With no movement at all
A little syrup of figs
Can unblock the wall.

So Mr Darling buys gilts
And pumps in some money
But don't you agree
That his eyebrows are funny.

Tuesday, March 03, 2009

Are you taking the P? P-values versus t-values: the “sting in the tail”