69 Hypothesis testing Worked example 1

This video demonstrates how to perform hypothesis testing using the critical value approach in econometrics. We will work through a practical example, starting with an estimated regression coefficient and its standard error. The core of the video focuses on a step-by-step process to determine if the coefficient is statistically different from zero at a 5% significance level. This includes setting up the null and alternative hypotheses, calculating the test statistic, determining the degrees of freedom and critical value, and finally, making a decision to reject or fail to reject the null hypothesis. In this econometrics example, we apply the critical value approach to hypothesis testing. We begin by setting up our hypotheses and then calculate the test statistic, which in this case is derived from the estimated coefficient and its standard error. Following this, we determine the appropriate distribution and degrees of freedom to find the critical value. The video visually illustrates the rejection region and compares our calculated test statistic to the critical value to make a decision. Subscribe to @AxiomTutoringCourses for more econometrics tutorials.