Hello,
Could you please assist with the following query.
I have estimated a state space and used a probit function to constrain the coefficient c(1) to below 1. I understand that the estimate of c(1) must be transformed in order to back out beta, using the following transformation: beta=(1/(1+exp(c(1))).
What I am not sure is whether the same transformation can be applied to transform the standard errors. I found that when doing this, the transformed standard errors are very small, even though the coefficients are insignificant, so I suspect this approach may not be correct. Could you please advise on how to back out the standard errors?
Many thanks in advance!
logit standard error
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- Non-normality and collinearity are NOT problems!
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Re: logit standard error
It’s a touch messy. Basically var(f(b)) = f’(b)var(b)f’(b), where f’ means first derivative.
Probably the easiest way to get the standard error is to look under coefficient,views,wald test and test
Probably the easiest way to get the standard error is to look under coefficient,views,wald test and test
Code: Select all
1/(1+exp(c(1)))=0
Re: logit standard error
Thanks for the advice. I have tried this approach but have run into an issue - it produces a standard error which seems very low, considering the coefficient is insignificant.
The results show that: beta=0.99; SE=0.087, p-value = 0.74
Since beta has been constrained to below 0.95, the p-value result seems fine, but the low standard error doesn’t appear credible. Is there any other way the standard error can be transformed within Eviews to double check the result?
I attach the workfile. Please see tab ‘2024’ > state space object ‘ss_0’ > results for c(1) and saved ‘wald_test’ as per your suggestion.
The results show that: beta=0.99; SE=0.087, p-value = 0.74
Since beta has been constrained to below 0.95, the p-value result seems fine, but the low standard error doesn’t appear credible. Is there any other way the standard error can be transformed within Eviews to double check the result?
I attach the workfile. Please see tab ‘2024’ > state space object ‘ss_0’ > results for c(1) and saved ‘wald_test’ as per your suggestion.
-
- Non-normality and collinearity are NOT problems!
- Posts: 3775
- Joined: Wed Sep 17, 2008 2:25 pm
Re: logit standard error
I think you've done everything correctly. But you may be misinterpreting significance.
Suppose c(1) is almost exactly zero, so not "significant." Then
1/(1+exp(c(1))) = 1/(1+e^0)=1/(1+1) = 0.5
which is significantly different from zero.
Suppose c(1) is almost exactly zero, so not "significant." Then
1/(1+exp(c(1))) = 1/(1+e^0)=1/(1+1) = 0.5
which is significantly different from zero.
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