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QM2 23-24 Session 2

The document outlines the structure and content of the Quantitative Methods II course at Maastricht University for the 2023-2024 academic year. It covers various statistical methods such as ANOVA, regression analysis, and systems of linear equations, along with their assumptions and applications. Additionally, it includes sections on financial math and provides practice exercises and old exam questions for students.

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14 views57 pages

QM2 23-24 Session 2

The document outlines the structure and content of the Quantitative Methods II course at Maastricht University for the 2023-2024 academic year. It covers various statistical methods such as ANOVA, regression analysis, and systems of linear equations, along with their assumptions and applications. Additionally, it includes sections on financial math and provides practice exercises and old exam questions for students.

Uploaded by

anastasiabeine
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Quantitative Methods II (QM2)

2023-2024

Maastricht University
How much confidence do you have in your knowledge?
Structure of course

Meeting 1 Meeting 2 Meeting 3 Meeting 4


STATS: STATS: STATS: STATS:

Comparing Two Means One-way ANOVA Chi-square test Multiple Regression

Comparing Two Understanding Residuals R² and F-tests


Proportions MATH:
Inference for Regression Building Multiple Regression
Inverse Matrix Models
MATH: MATH:
System of Linear Equations MATH:
Matrices and Vectors Linear Programming
Financial Math Linear Programming
One-way ANOVA
Assumptions & Conditions for ANOVA

Many assumptions from Two-Sample t-Test apply

Independence Assumption
• Groups Independent from each other
• Randomization Condition🡪 independent individual observations

Equal Variance Assumption


• Assume true variances of treatment groups are equal
• Similar Variance Condition
• Look at side-by-side boxplots  have they got the same spread?

Normal Population Assumption


• Nearly Normal Condition
• Check for severe skewness
• Check for boxplot outliers
• Large sample sizes  Central Limit Theorem
Analysing a design in one factor – The one-way analysis of Variance (ANOVA)

Extends t-Test to more than 2 groups


• Analyse whether the means of >2 groups equal each other

F-Statistic: test statistic which compares the variance of the means against the variance we expect from
individual responses (among groups vs within the group)
• MST = Mean Square due to Treatments (Between the groups)
• MSE = Mean Square due to Errors (Within the groups)

2 different df
MSE N-k
MST k-1
• K=number of groups
• N=total number of all observations

6
Analysing a design in one factor – The one-way analysis of Variance (ANOVA)

7
OLD EXAM QUESTIONS
Old exam questions

K=3 MST= 185,862/2= 92,931


N=155+722+383=1260 MSE= 27161,577/1257= 21,617

DFt: 3-1
DFe: 1260 – 3
DFtotal: 1260 – 1 F= MST/MSE= 4,3
SYSTEM OF LINEAR EQUATIONS
SYSTEM OF LINEAR EQUATION

A system of linear equations with m equations and n variables is a m x n system. All the linear
equations that form a system must be satisfied at the same time.

When the system is rearranged in a such that all terms containing a variable are on the left-hand
side in the same order, and the constant terms are on the right-hand side, it is said to be in the
standard form.
LINEAR SYSTEM AS VECTOR EQUATIONS

A system of linear equations can be described through a matrix containing the


coefficients of the system , a vector with the constant term and a vector
containing variables.

SYSTEM:
1. Coefficient matrix : The matrix in which we summarized the coefficients of
the system
2. Vector of unknows : Vector with the variables (A)
3. Vector of constant : The vector b containing the constants of the system (b)

AUGMENTED COEFFICIENT MATRIX: coefficient matrix and the vector of


constants.
VECTOR EQUATION

• Every m x n system of linear equations in standard form can be written as: Ax = b where A is
the coefficient matrix in the system, x is the vector of unknowns and b is the vector of constants.

• SOLUTIONS OF THE SYSTEM :


• Inconsistent system: A system with no solution.
• Solvable/consistent system: A system with at least one solution.
• Uniquely solvable: A system with only one solution.

• A system of linear equation has either no solutions, one solution or infinitely many solutions.
This is because the equation can intersect , be parallel or coincide.
SOLVING A SYSTEM OF LINEAR EQUATIONS
UNIQUE SOLUTION

Elementary operations:
-Multiplying or dividing an equation by a non-zero number.
-Interchanging the position of two equations.
- Adding or subtracting a multiple of one equation to or from another.
A process during which we use these operations to find the solutions of a system of linear
equations is called Gaussian elimination. It is made through the use of the augmented coefficient
matrix
REDUCED MATRIX

Through the Gaussian elimination we obtain a reduced matrix in the augmented coefficient matrix.

A reduced matrix: has three characteristics:


1) The left-most non-zero entry in each row is 1 (called a leading one).
2) Every column containing a leading one has zeroes elsewhere.
3) Every leading one is to the right of the leading one in the row above (if any).

Zero row: a row with only zeroes in a 3x3 matrix can correspond to this equation: 0 x + 0 y = 0
As this equation is satisfied for all values of x and y, it is called a redundant equation. Such rows are always put at the
lowest position of the reduced matrix.
INFINITE NUMBER OF SOLUTIONS

• It happens when we have more variables than equations. In this case we can not get the exact
values of each variable since we do not have enough equations.

• The two variables q and p correspond with a column containing a leading one, they are called
leading variables.
• The non-leading variable Y is called a free variable
• This system has an infinite number of solutions because we can choose any value for the free
variable Y (or p, or q, depending on which one we choose to be the free variable), from which
the values for the other two variables will follow. For any value of Y we get different values for p
and q.
• The endogenous variable of an economic model should coincide with the leading variables of
the system, while the exogenous variables should coincide with the free variable.
CONSISTENCY OF A SYSTEM
PRACTICE
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
INVERSE OF A MATRIX
INVERSE OF A MATRIX

ANALOGY WITH NUMBERS :


RULES AND PROPERTIES FOR MATRICES

REMEMBER : Only squared matrices can be invertible !!


FINDING MATRICES : MAIN IDEA
METHOD
DETERMINANT OF A 2x2 MATRIX
EXPANSION ALONG THE FIRST ROW
INTHERCHANGE ROWS
TRANSPOSE THE MATRIX
BIGGER MATRICES

REMEMBER THE CONDITION : IF THE


DETERMINANT OF A MATRIX IS NOT
ZERO THEN IT IS INVERTIBLE
DETERMINANT PROPERTIES
PRACTICE
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
What is the determinant of the 2C matrix?
OLD EXAM QUESTIONS
OLD EXAM QUESTIONS
Financial Math
FINANCIAL MATHS
FINANCIAL MATHS
FINANCIAL MATHS
FINANCIAL MATHS
Let’s practice!
EXERCISE
EXERCISE
EXERCISE
SOLUTION
EXERCISE
SOLUTION
QUESTIONS?

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