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Thread: The Dummy Variable Alternative to the Chow Test

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    The Dummy Variable Alternative to the Chow Test




    Hello,
    I'm writing a paper for econometrics. The deadline is approaching, but we have some problems with answering a question about the model that we developed.

    Instead of using a Chow Test, we have to utilize the dummy on intercept/slope technique.
    We have to check whether women would switch faster to fruitbeer than men when the price of pilsbeer rises. We also have to check whether old people would switch faster to trappistbeer than young people when the price of pilsbeer rises.
    We think that our variable "gender" doesn't need any changes because it contains only 0 and 1 values. We think that we will have to make a dummy variable for young people (0) and old people (1).
    We tried to use the formula that is attached to this post, but we're not sure how to fill in and calculate this formula. To solve this problem, we have to use our IBM SPSS output (see attachment).
    The result should be the same as the result of our Chow Test. Our second problem is that we don't know how we have to interpret the results of the dummy variable alternative test.

    Is there anyone that understands our problems and can help us out within a short period of time?
    Thank you in advance!
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    Last edited by econometrics; 05-21-2015 at 04:58 PM.

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