ABSTRACT
Students are shown a five-step procedure for testing various hypotheses concerning OLS estimators. There is also a test for r2 = 0. TYPE I and TYPE II errors are explained conceptually and technically. Confidence intervals for the structural parameters are covered. There are many details involved with these tests, and practice is crucial to learning. Explicit examples are included for each hypothesis test and the end-of-chapter problems provide practice. The chapter closes with a discussion of probability-values, or p-values as they are more commonly known. Students are expected to be able to use p-values in order to do the end-of-chapter questions. Students often ask about the conceptual meaning of degrees of freedom. They are used extensively in this chapter. The next chapter includes an appendix explaining degrees of freedom because they are better explained in the context of multivariate regression. The instructor may want to look at that now in order to address student questions in this chapter.
