Dr. TU Thuy Anh Faculty of International Economics 1 KTEE 310 FINANCIAL ECONOMETRICS STATISTICAL INFERENCE Chap 5 & 7 – S & W Model: Y = b1 + b2X + u Null hypothesis: Alternative hypothesis: TESTING A HYPOTHESIS RELATING TO A REGRESSION COEFFICIENT 0 0 2 2 H : b  b 0 1 2 2 H : b  b We will suppose that we have the standard simple regression model and that we wish to test the hypothesis H0 that the slope coefficient is equal to some value b2 0. We test it against the alternative hypothesis H1 , which is simply that b2 is not equal to b2 0 Model: Y = b1 + b2X + u Null hypothesis: Alternative hypothesis: Example model: p = b1 + b2w + u Null hypothesis: Alternative hypothesis: TESTING A HYPOTHESIS RELATING TO A REGRESSION COEFFICIENT As an illustration, we will consider a model relating p, the rate of growth of prices and w, the rate of growth of wages. We will test the hypothesis that the rate of price inflation is equal to the rate of wage inflation. The null hypothesis is therefore H0 : b2 = 1.0. 0 0 2 2 H : b  b H0 : b 2  1.0 H1 : b 2  1.0 0 1 2 2 H : b  b