In a statistical model, variations in the dependent variable can be attributed to independent variables. However, there is a random element that is not accounted for and this is the stochastic error.
A Stochastic error term is a term that is added to a regression equation to introduce all of the variation in Y that cannot be explained by the included Xs. It is, in effect, a symbol of the econometrician's ignorance or inability to model all the movements of the dependent variable.
Regression analysis is based on the assumption that the dependent variable is distributed according some function of the independent variables together with independent identically distributed random errors. If the error terms were not stochastic then some of the properties of the regression analysis are not valid.
Mathematical model is exact in nature.it has Beta zero and Beta one and no stochastic or disturbance variables. Econometric model represents omitted variable, error in measurement and stochastic variables.
The definition to the term "Stochastic Process" is: A statistical process involving a number of random variables depending on a number variable. Which in most cases, is time.
Stochastic means non-deterministic. This means that something contains an inherent degree of randomness. For more detail, you should consult a dictionary or more detailed literature on probability theory.
A stochastic error indicates an error that is random between measurements. Stochastics typically occur through the sum of many random errors.
A Stochastic error term is a term that is added to a regression equation to introduce all of the variation in Y that cannot be explained by the included Xs. It is, in effect, a symbol of the econometrician's ignorance or inability to model all the movements of the dependent variable.
Regression analysis is based on the assumption that the dependent variable is distributed according some function of the independent variables together with independent identically distributed random errors. If the error terms were not stochastic then some of the properties of the regression analysis are not valid.
Mathematical model is exact in nature.it has Beta zero and Beta one and no stochastic or disturbance variables. Econometric model represents omitted variable, error in measurement and stochastic variables.
Stochastic Models was created in 1985.
G. Adomian has written: 'Stochastic systems' -- subject(s): Stochastic differential equations, Stochastic systems
Wikipedia states that stochastic means random. But there are differences depending on the context. Stochastic is used as an adjective, as in stochastic process, stochastic model, or stochastic simulation, with the meaning that phenomena as analyzed has an element of uncertainty or chance (random element). If a system is not stochastic, it is deterministic. I may consider a phenomena is a random process and analyze it using a stochastic simulation model. When we generate numbers using a probability distribution, these are called random numbers, or pseudo random numbers. They can also be called random deviates. See related links.
C. W. Gardiner has written: 'Handbook of Stochastic Methods' 'Stochastic methods' -- subject(s): Stochastic processes 'Quantum noise' -- subject(s): Stochastic processes, Quantum optics, Josephson junctions
Quan-Lin Li has written: 'Constructive computation in stochastic models with applications' -- subject(s): Stochastic processes, Stochastic models
monte carlo simulation is used to give solutions of deterministic problems whereas stochastic simulation is used for stochastic problems.
You can download free copy of Stochastic Filtering by Ramaprasad Bhar here. /forexebooks.co.in/stochastic-filtering-applications-finance-ebook/
Hiroaki Morimoto has written: 'Stochastic control and mathematical modeling' -- subject(s): Stochastic control theory, Optimal stopping (Mathematical statistics), Stochastic differential equations