Reason of applying OLS(Ordinary Least Square) and applying method on E-views

                     OLS(Ordinary Least Square) 

 Reasons of applying OLS(Ordinary Least Square) 

we apply OLS on time series data 

Time series data

1. one country
2. large numbers of year

                                                  Data file importing on E-views

There is various methods to import data file, but i am always apply direct method

Stationarity cheack

For stationarity, we apply augmented dickey fuller unit root test. First step is to check the graph of the variables if graph line touch with y-xix then we add intercept in it and if graph line is cervical (ups and down) then we add trend.

hypothesis

H0= stationary

H1= non stationary

if prob value less then 0.05 then we accept null hypothesis otherwise reject and alternative accept.

if all variables stationary at level then we apply OLS model.

                                                          Unit root test

OLS(Ordinary Least Square) 

First of all select dependent variable and then independent variables for selecting after selecting dependent variable finger put on Ctrl baton then select independent variables or click right - open as equation - least square- OK so check results .

H0= prob value greater then  0.05

H1 prob value less then 0.05

if prob value less then 0.05 then we accept alternative  hypothesis otherwise reject and null accept.

                                           OLS(Ordinary Least Square) 

Interpretation:

Prob value of literacy rate is less then 0.05  which means that literacy rate have a significant effect on gini. Negative coefficient indicate that one unit increase in literacy rate brings to a 0.20 unti decrease in gini (if we taking a log of variables then we interpret in percentage rather then in units)