Finance and Financial Management Commons^™

An Exercise In Bayesian Econometric Analysis Probit And Linear Probability Models, Brooke Jeneane Siler

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

The aim of this paper is to carry out a Bayesian econometric application. Using a dataset obtained from Wooldridge's Introductory Econometrics textbook, each step in conducting a Bayesian econometric analysis is performed and explained. For illus- trative and comparative purposes, two limited dependent variable regression forms were used: a linear probability model and a probit model. This paper covers the ben- ets of Bayesian methodology, including selection of distributions for the prior and the likelihood. Additionally, a series of diagnostic checks are done after the models are computed.