Assignment Advance Research Methods

Submitted to Mr. Dr. Mehboob

Submitted by Atyab Tahir BBA- 6 B

Question 1: Write a note on scale?

Ans: Scale is a concept, device or any procedure used in arranging, measuring and quantifying events, objects or phenomenon in any sequence. There are four types of scales in research methodology which are as follows:

Nominal scale:
The lowest measurement level you can use, from a statistical point of view, is a nominal scale. A nominal scale, as the name implies, is simply some placing of data into categories, without any order or structure. A physical example of a nominal scale is the terms we use for colors. The underlying spectrum is ordered but the names are nominal. In research activities a YES/NO scale is nominal. It has no order and there is no distance between YES and NO.

Ordinal scale:
An ordinal scale is next up the list in terms of power of measurement. The simplest ordinal scale is a ranking. When a market researcher asks you to rank 5 types of beer from most flavourful to least flavourful, he/she is asking you to create an ordinal scale of preference. There is no objective distance between any two points on your subjective scale. For you the top beer may be far superior to the second prefered beer but, to another respondant with the same top and second beer, the distance may be subjectively small

Interval scale:
The standard survey rating scale is an interval scale. When you are asked to rate your satisfaction with a piece of software on a 7 point scale, from Dissatisfied to Satisfied, you are using an interval scale. It is an interval scale because it is assumed to have equidistant points between each of the scale elements. This means that we can interpret differences in the distance along the scale. We contrast this to an ordinal scale where we can only talk about differences in order, not differences in the degree of order. Interval scales are also scales which are defined by metrics such as logarithms. In these cases, the distances are note equal but they are strictly definable based on the metric used.

Ratio:
A ratio scale is the top level of measurement and is not often available in social research. The factor which clearly defines a ratio scale is that it has a true zero point. The simplest example of a ratio scale is the measurement of length (disregarding any philosophical points about defining how we can identify zero length).

The best way to contrast interval and ratio scales is to look at temperature. The Centigrade scale has a zero point but it is an arbitrary one.

Question 2: Write a comprehensive note on the four stages off the econometric research?
Ans: The four stages of econometric research method are as follows: 1. 2. 3. 4. Specification of the model Estimation of the model Evaluation of estimates Evaluation of the forecasting power of the estimated model.

Specification of model:
The first and the most important step for any econometrician has to take in the attempting the study of any relationship between variables, is to express this relationship in mathematical form, that is to specify the model, with which the economic phenomenon will be explored empirically. Variables of the model: From the above source of knowledge econometrician evaluate certain variables which includes the dependent variables, independent variables, moderating variables and intervening variables. These variables helps to understand the relationship with each other. Example: Q=(Pz,Po,Y,T) Q=quantity demanded Pz=price of commodity Po=price of other commodity Y=customers income T=suitable taste of customers The above mentioned is the law of demand equation with different variables. Signs and magnitude of parameters: Along the variables in an equation there are certain parameters and signs in the equation which shows the relationship of different variables. Parameter is a constant in an equation that varies in other equations of the same general form, especially such a constant in the equation of a curve or surface that can be varied to represent a family of curves or surfaces.

Example: Q=o Pz In the law of demand is the parameter and the sign of the parameter is - in this equation. Mathematical form of the model: Economic theory may or may not indicate the precise mathematical form of the relationships, or the number of equations to be included in the economic model. Example: The theory of demand does not determine whether the demand for a particular commodity should be studied with the single equation model or with a system of simultaneous equations.

Estimation of the model:

After the model has been specified the econometrician must proceed with its estimation , in other words he must obtain numerical estimates of the coefficients of the model. The stage of estimation of model includes following steps: Gathering data for the estimation of model: The data used in the estimation of model may be of several types: a) Time series: It gives information about the numerical values of variables from period to period. Example, the data on gross national income in the period 1950-1960 on the variable consumption. b) Cross-section data : These data gives information on the variables concerning individual agents at a given point. For example, budget of families shows the expenses of each families. c) Panel data: These are repeated surveys of a single sample in different periods of times. For example, the budget expenses of the families in different period of times. d) Engineering data: These data give information about the technical requirements of the method of production employed for producing a certain commodity. These are collected from the producers of the commodity to use in the studies. For example, we can obtain information from the steel firms about the engineering characteristics.

e) Legislation and other regulations: Some models can be estimated from direct information about the nature of the relationship involved. This is particularly true for institutional functions, like tax functions. For example,in most countries the taxation of cigarettes consumption is determined by law. Examination of the identification condition of the condition: Identification is the procedure by which we attempt to establish that the coefficients which we shall estimate by the application of some appropriate econometric technique are actually the true coefficients of the function in which we are interested. Examination of the aggregation problems of the function: The aggregative variables may involve: a) Aggregation over individuals: For example, the total income is the sum of the individuals income. b) Aggregation over commodities: For example if we want to estimate the demand function for food with the explanatory variable total income, the price of food and the price of other commodities all variables will include certain level of aggregation. c) Aggregation over time period: For example the production of most manufacturing commodities is completed in a period shorter than a year. If we need an annual data for th research it wont be possible. d) Spatial aggregation: For example the population of towns, regions, countries and so on . Examination of the degree of correlation among the explanatory variables: Most economic variables are correlated in the sense that they tend to change simultaneously during the various phases of economic activity. Income, employment, tax, consumption etc tend to grow in the boom period while decline in the period of depression. Choice of the appropriate econometric technique: There are two classified techniques: a) Single-equation method: These are techniques which are applied to one equation at a time. The most important are; the classical least squares or ordinary least squares. b) Simultaneous-equation method: These are techniques which are applied to all the equations of a system at once, and give estimates of the coefficients of all the functions.

Evaluation of estimates:
After the estimation of the model the econometrics must proceed with the evaluation of the results of the calculation. The results are classified into two categories: Economic a priorcriteria: These are determined by the principles of economic theory and refer to the sign and the size of the parameters of economic relationships. For example in the equation of the law of demand the prior criteria can be measured with the sign and size of the parameter . Statistical criteria: First order These are determined by statistical theory and aim at the evaluation of the statistical reliability of the estimates of the parameters of the model. The most widely used statistical criteria are the correlation coefficient and the standard deviation of the estimates. Econometric criteria: Second-order test These are set by the theory of the econometrics and aim at the investigation of whether the assumptions of the econometrics method employed are satisfied or not in any particular case. The econometrics criteria serve a second test in other words they determine the reliability of the statistical criteria, and in particular of the standard errors of the parameter estimates.

Evaluation of the forecasting power of the estimated model:

The final stage of any applied econometrics research is the investigation of the stability of the estimates, their sensitivity to change in the size of the sample. We must establish whether the estimated function performs adequately outside the sample of data, whose average variation it represents.

Question 3: Write a short note on: Mean:

In probability and statistics, mean and expected value are used synonymously to refer to one measure of the central tendency either of a probability distribution or of the random variable characterized by that [Link] arithmetic mean (or simply "mean") of a sample is the sum the sampled values divided by the number of items in the sample:

Median:

In statistics and probability theory, the median is the numerical value separating the higher half of a data sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one (e.g., the median of {3, 5, 9} is 5). If n is odd then Median (M) = value of ((n + 1)/2)th item term. If n is even then Median (M) = value of [((n)/2)th item term + ((n)/2 + 1)th item term ]/2

Mode:
The mode is the value that appears most often in a set of data. The mode of a discrete probability distribution is the value x at which its probability mass function takes its maximum value. In other words, it is the value that is most likely to be sampled. The mode of a continuous probability distribution is the value x at which its probability density function has its maximum value, so, informally speaking, the mode is at the peak. The mode of a sample is the element that occurs most often in the collection. For example, the mode of the sample [1, 3, 6, 6, 6, 6, 7, 7, 12, 12, 17] is 6.

Range:
In arithmetic, the range of a set of data is the difference between the largest and smallest values. However, in descriptive statistics, this concept of range has a more complex meaning. The range is the size of the smallest interval which contains all the data and provides an indication of statistical dispersion. It is measured in the same units as the data. Since it only depends on two of the observations, it is most useful in representing the dispersion of small data sets

Variance:
In probability theory and statistics, the variance is a measure of how far a set of numbers is spread out. A variance of zero indicates that all the values are identical. A non-zero variance is always positive: a small variance indicates that the data points tend to be very close to the mean (expected value) and hence to each other, while a high variance indicates that the data points are very spread out from the mean and from each other.

Standard deviation:
In statistics and probability theory, the standard deviation (represented by the Greek letter sigma, ) shows how much variation or dispersion from the average (mean, also called expected value) exists. A low standard deviation indicates that the data points tend to be very close to the mean; a high standard deviation indicates that the data points are spread out over a large range of values.