tag:blogger.com,1999:blog-2198942534740642384.post3274116588771523034..comments2023-10-24T03:16:41.009-07:00Comments on Econometrics Beat: Dave Giles' Blog: Logit, Probit, & HeteroskedasticityDave Gileshttp://www.blogger.com/profile/05389606956062019445noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2198942534740642384.post-85144828088742727472018-05-05T15:01:39.465-07:002018-05-05T15:01:39.465-07:00Diego - that's fantastic!!!! I'm so glad i...Diego - that's fantastic!!!! I'm so glad it worked out for you. DGDave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-33105033656277756092018-05-05T13:15:21.887-07:002018-05-05T13:15:21.887-07:00Thank you for your prompt response. I followed you...Thank you for your prompt response. I followed your suggestion to open the program file with a text editor and it worked. It was possible to manually execute the commands and I finally got my result (my model is fine). It took some time to wrap my head around the process but I've hopefully learned one thing or two!Diegonoreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-86864140865536759032018-05-04T11:44:07.426-07:002018-05-04T11:44:07.426-07:00Diego - you won't be able to perform these tes...Diego - you won't be able to perform these tests in EViews without being able to run a program file. Usually, I wouldn't make the following offer, but if you want to send me your EViews workfile with the data in it, I'll run it for you. Send it dgiles@uvic.ca BTW you can open EViews program files with any text editor (e.g., Notepad). So, if you go to my website here - http://web.uvic.ca/~dgiles/downloads/binary_choice/index.html<br />you can at least look at the program files to see the code that I have written. These files have various comments in them to explain what is going on.Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-76067244478801534712018-05-04T10:13:17.461-07:002018-05-04T10:13:17.461-07:00Dear Professor Giles, thank you for these posts. I...Dear Professor Giles, thank you for these posts. I went to your website but I'm still an undergraduate and I only have a student version of EViews. This does not allow me to open program files. How could I perform tests for heteroskedasticity and functional form in EViews? I want to investigate a logit with a binary response, 0 or 1. I have a constant and three independent variables with about 500 values in each of them. Thank you in advance.Diegonoreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-52053881985342349572018-02-23T08:47:27.703-08:002018-02-23T08:47:27.703-08:00Coming from a background in statistics rather than...Coming from a background in statistics rather than econ, I would like to share some of my thoughts on this discussion.<br /><br />For this discussion you use a latent variable specification of the probit model. If a latent variable is to be assumed, a normal random variable seems like a pretty natural choice. This latent variable specification allows you to introduce heteroscedasticity into the model as you discussed. <br />The probit models tends to not be seen much outside of economics; elsewhere everyone tends to default to logit models. Of course the logit model can be given an almost identical latent variable specification: Y* = XB + e, where e is instead assumed to be logistic distributed.<br /><br />For the logit model, however, this specification is quite uncommon. Logistic distributions are a somewhat exotic distribution, they are unlikely to come about naturally in the same way as normal distribution (central limit theorem and maximal entropy considerations). Instead the logit model is usually specified as LOG-ODDS = XB. While the two specifications are mathematically identical, with the alternative specification we think of the observed responses as bernoulli random variables with varying propensities to success. No latent variable is introduced. This is a (to me at least) a much more natural specification as the logistic distribution is such an unnatural distribution. This alternative specification has an important consequence though, to introduce the same kind of heteroskedasticity as in the probit model, the link function would have to vary for different individuals. This would break the log-odds interpretation of the logit model, and so this kind of heteroscedasticity doesn't make much sense in logit models. What to make then of the results of a (in the context of the probit model) heteroscedasticity test for the logit model? In this case it doesn't indicate heteroscedasticity, but rather indicates some kind of non-linearity in the effects or other misspecification. It seems to me then that the discussion you presented here heteroscedasticity actually is a more general discussion on model misspecification. To me, the choice of model (logit/probit), and even the specification of the model (link-function/latent-variable) comes in to play in understanding how to interpret the results of model misspecification test.Kroutonerhttps://www.blogger.com/profile/05758537158353883675noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-75717825882189566112017-06-26T08:31:22.243-07:002017-06-26T08:31:22.243-07:00Ketevani - thanks for spotting that :-) Now fixed...Ketevani - thanks for spotting that :-) Now fixed. DGDave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-875102268240654782017-06-26T05:35:42.456-07:002017-06-26T05:35:42.456-07:00Hello, thanks for very interesting blog :) I would...Hello, thanks for very interesting blog :) I would like to ask short question regarding log-likelihood in equation 6. Should not there be x*beta over square root of exponential function? It does not change any intuition, but just for technicality. Thanks in advance!Anonymoushttps://www.blogger.com/profile/18095688842525771088noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-18289163870585562632015-06-05T09:39:14.849-07:002015-06-05T09:39:14.849-07:00Thanks for that - all fixed! (Bad "copy and p...Thanks for that - all fixed! (Bad "copy and paste on my part.)Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-41648223483621008572015-06-04T23:19:01.323-07:002015-06-04T23:19:01.323-07:00There is one log too much in equations (4) and (6)...There is one log too much in equations (4) and (6). I think the last term should be: ....+(1 - yi) log[1 - F(xi'β)]}? What do you think?Anonymousnoreply@blogger.com