Since electricity demand and the regressors are in logarithms, the demand elasticities are directly derived from the coefficients. Monthly binary dummy covers from January to November and does not include dummy for December to avoid dummy variable trap. Severe multicollinearity between price variables of on-peak, mid-peak and off peak limited the estimation of cross price elasticity. We assume that individual error components are uncorrelated with each other. With regards to choice of econometric technique, we used Cochrane-Orcutt estimation to adjust serial correlation in error terms. Due to the same explanatory variables appear in the log-log equations, which is in fact OLS is equivalent to seemingly unrelated regression, it is not*…show more content…*

Multicollinearity occurs when two or more predictors in the model are correlated and provide redundant information about the response. That is, a multiple regression model with correlated predictors can indicate how well the entire bundle of predictors predicts the outcome variable, but it may not give valid results about any individual predictor, or about which predictors are redundant with respect to others. Consequences of high multicollinearity is that increase in standard error of estimates of the b’s so that decrease in reliability (Farrar and Glauber 1967). In case of perfect multicollinearity the predictor matrix is singular and therefore cannot be inverted. Under these circumstances, the ordinary least-squares estimator b '=(X 'X)-1X 'y does not exist. To detect multicollinearity, we calculate the variance inflation factors for each predictors in RHS (Mansfield and Helms 1982). The VIF (variance inflation factors) for each predictor xj is: VIFj = 1/( 1−R2j). R2j is the coefficient of determination of the model that includes all predictors except the jth predictor. The models for the VIF test are: VIF for ln Pon: ln Ponm = ln I + b2 ln Pmidm + b3 ln Poffm + b4 ln GPPt + cmDm + uont VIF for ln Pmid: ln Pmidm = ln I + b2 ln Ponm + b3 ln Poffm + b4 ln GPPt +

Multicollinearity occurs when two or more predictors in the model are correlated and provide redundant information about the response. That is, a multiple regression model with correlated predictors can indicate how well the entire bundle of predictors predicts the outcome variable, but it may not give valid results about any individual predictor, or about which predictors are redundant with respect to others. Consequences of high multicollinearity is that increase in standard error of estimates of the b’s so that decrease in reliability (Farrar and Glauber 1967). In case of perfect multicollinearity the predictor matrix is singular and therefore cannot be inverted. Under these circumstances, the ordinary least-squares estimator b '=(X 'X)-1X 'y does not exist. To detect multicollinearity, we calculate the variance inflation factors for each predictors in RHS (Mansfield and Helms 1982). The VIF (variance inflation factors) for each predictor xj is: VIFj = 1/( 1−R2j). R2j is the coefficient of determination of the model that includes all predictors except the jth predictor. The models for the VIF test are: VIF for ln Pon: ln Ponm = ln I + b2 ln Pmidm + b3 ln Poffm + b4 ln GPPt + cmDm + uont VIF for ln Pmid: ln Pmidm = ln I + b2 ln Ponm + b3 ln Poffm + b4 ln GPPt +

Related

- Good Essays
## Analysis of Commercial Bleach Lab Essay

- 1708 Words
- 7 Pages

l19 – 18.33l = .67, l17 – 18.33l = 1.33, l19 – 18.33l = .67,

- 1708 Words
- 7 Pages

Good Essays - Decent Essays
## Big Suzy Snack Cake Essay

- 1317 Words
- 6 Pages

* Correlation coefficient (R-squared) – This represents how well the independent variables (X) explain the response variable (Y).

- 1317 Words
- 6 Pages

Decent Essays - Good Essays
## Essay about econ3208 midsem 2011

- 2457 Words
- 10 Pages

Indexi = 0.053 - 0.095 Fi + 0.020 PHDi + 0.007 FPHDi + 0.0015 TENi

- 2457 Words
- 10 Pages

Good Essays - Better Essays
## Course Project Part C

- 1231 Words
- 5 Pages

This support that Multiple Linear Regression model is better than the Simple Linear Regression, because it show the relationship with the variables more accurately and you can know which one to discard, and which one to

- 1231 Words
- 5 Pages

Better Essays - Decent Essays
## Appropriate Regression Analysis

- 167 Words
- 1 Pages

The inappropriate relationships between correctional officers and offenders has garnered a lot of attention as of late. As when news media focuses and depicts some police officers negatively, correctional officers are apt to face similar treatment from the press when a mistake is made. Recently, what gains attention, and is the most apt to be sensationalized, are inappropriate relationships with offenders especially of a sexual nature. Nevertheless, sensationalized or not, at times some of the attention is arguably well deserved. In 2013, CBS and many other news outlets and media reported on four female correctional officers that were impregnated by the same inmate. The resulting investigation opened a Hoover Dam of compromised officers.

- 167 Words
- 1 Pages

Decent Essays - Good Essays
## Essay about Organic Chemistry Ii Lab Report

- 1715 Words
- 7 Pages

integrations at 1.4 ppm refers to the (S)-1-phenylethanol. I was unable to use my own

- 1715 Words
- 7 Pages

Good Essays - Better Essays
## The Signs of Suicide Program

- 1456 Words
- 6 Pages
- 3 Works Cited

448). Second, the authors (2004) utilize “HLM 5 software to perform 2-level multivariate analyses of program effects” (p. 448). For each outcome variables, there are two major corresponding equations:

- 1456 Words
- 6 Pages
- 3 Works Cited

Better Essays - Better Essays
## Grad Papaer

- 1982 Words
- 8 Pages

The regression analysis was initially run using all variables to determine the significance of each when associated

- 1982 Words
- 8 Pages

Better Essays - Satisfactory Essays
## Obesity And The Pediatric Patients

- 1517 Words
- 7 Pages

1 21.3 ± 2.5 20.9 ± 2.6 20.4 ± 2.3 20.5 ± 1.2 22.5 ± 3.9 21.8 ± 3.9 21.2 ± 2.1 23.4 ± 3.2 26.1 ± 4.5* 25.1 ± 4.6* 25.1 ± 3.7* 25.1 ± 3.5*

- 1517 Words
- 7 Pages

Satisfactory Essays - Decent Essays
## Molarity Analysis

- 466 Words
- 2 Pages

Equation 7 is equation 6 rearranged to solve for the missing variable Vi. From equations 6 and 7 Mi is the initial molarity and Vi the initial volume. Mf is the final molarity and Vf the final molarity.

- 466 Words
- 2 Pages

Decent Essays - Better Essays
## BFF5040 ASA Group 18 Assignment FINAL 1

- 4102 Words
- 17 Pages

The estimated coefficients: γb, γs and γh correspond to risk factors in the first pass regression; hence, the second-pass regression is estimated by setting up the following hypothesis:

- 4102 Words
- 17 Pages

Better Essays - Better Essays
## Aqr's Momentum Funds (a) Essays

- 1417 Words
- 6 Pages

The absolute value of intercept (alpha) in the Three-Factor Model for Low Portfolio is 1.1159, 0.1347 for 5 Portfolio, 0.6354 for High Portfolio, and 1.4591 for High-Minus-Low Portfolio. They all are larger than those in the Four-Factor Model, given 0.2081 for Low Portfolio, 0.0961 for 5 Portfolio, 0.0412 for High Portfolio, and 0.0402 for High-Minus-Low Portfolio. Therefore, alpha, a measurement of deviation from the model, is much smaller in the Four-Factor Model than in the Three-Factor Model. It shows that the Four-Factor Model fits the real situation better. In addition, we could see that R-Square (percentage of data that can be explained by the model) for the

- 1417 Words
- 6 Pages

Better Essays - Satisfactory Essays
## Econometrics. a Regression Analysis

- 2927 Words
- 12 Pages

* The effect of heteroskedasticity on the OLS estimator standard errors are that the results in adjusted robust standard errors cause the homoskedasticity results to be incorrect standard errors.

- 2927 Words
- 12 Pages

Satisfactory Essays - Good Essays
## Data Analysis And Interpretation Of The Data Essay

- 1914 Words
- 8 Pages

Table 4.1 presents the panel unit-root test results. There are two groups of hypotheses that are involved here. In the first four methods, the null hypothesis is: there is panel unit-root and the alternative hypothesis is: there is no panel unit-root and the decision

- 1914 Words
- 8 Pages

Good Essays