Statistics and econometrics are very important terms to know for a beginner. There are various differences between the terms. In this blog, we are going to share with you the comparison “Statistics vs Econometrics”. Before going deeper, Let’s start with a short introduction to each of these terms.
What is Statistics?
The word “statistics” comes from the Latin word “status,” which denotes a grouping of statistics. It is used to display information with human interest. A branch of applied mathematics called statistics is concerned with acquiring, analyzing, describing, and drawing conclusions from quantitative data. Decisions are then made based on the information gathered. The mathematical theories of statistics make extensive use of linear algebra, probability theory, and differential and integral calculus.
Statistical methods are used by financial analysts to check, examine, and summarise enormous amounts of data into a mathematical form. Statistics is used in a variety of fields, including business, social sciences, industry, psychology, and others. There are many uses of statistics in various fields.
Types of Statistics
The study of statistics can be divided into two types. Descriptive and inferential statistics are among them.
Descriptive statistics define a population’s basic characteristics and how the data is organized. This allows analysts to recognize data features and make sense of it.
There are two basic forms or types of descriptive statistics used by scientists:
- Measures of central tendency
- Measures of spread
In inferential statistics, to infer trends regarding a big population, complex mathematical computations are used. It is tough to analyze each member of a huge population one by one while analyzing a large population.
Inferential statistics are used by scientists, between variables in a sample population, to discover the relationships and then to make predictions about how the variables relate to the whole population.
The following are the two primary classifications of inferential statistics:
- Confidence interval
- Hypothesis testing
Functions of Statistics
These are some Important functions of statistics that are shown below:
- Statistics simplifies complexity
- Statistics facilities comparison
- To help in the formulation of policies
- Forecasting is aided by statistics.
- Statistics is a method of presenting facts in a definite format.
- Statistics aids in the formulating and testing of hypotheses.
What Is Econometrics?
Econometrics is a branch of economics that studies economic data using statistical and mathematical approaches. Those who work in the field of econometrics are known as econometricians.
Econometricians use statistical methods or tools including
- Regression analysis
- Statistical inference
- Frequency distributions
And many more to examine economic theories and hypotheses. Econometricians compare the results with the real data and observations after putting the economic theories to the test, for forecasting future economic trends.
Types of Econometrics
Theoretical and applied econometrics are the two main types of econometrics.
To estimate any unknowns, this type of econometrics analysis looks at the existing statistical techniques or tests’ qualities or properties. Theoretical econometricians may come up with new methodologies of statistics to account for economic data anomalies. To demonstrate the viability of new processes, this field of econometrics focuses on numerical data, theoretical statistics, and mathematics.
To convert qualitative statements into quantitative ones, the second type of econometrics involves techniques. It is frequently in response to the work of applied econometricians who have discovered unexplained variations in data sets that theoretical econometricians design new statistical approaches. These new tools can then be used by applied econometricians to test their hypotheses.
Functions of Econometrics
Econometrics has three functions basically which are interrelated functions:
- In the Econometrics first function, it puts economic theories or hypotheses proposed by eminent econometricians to the test.
- The Econometrics’ second function, for economic connection variables, produces numerical estimates. To make decisions, these are the important ones.
- In the Econometrics third function, is for the prediction of economic events.
Statistics vs Econometrics: Tabular Differences
|Statistics is the study and manipulation of data, including methods for data analysis, collection, examination, and conclusion.||In economics and finance, econometrics is the use of statistical tools to quantitative data to develop theories or test hypotheses.|
|Descriptive and Inferential statistics are the two major areas of statistics.||Techniques like regression models and null hypothesis testing are used in econometrics.|
|To make better-informed business and investing decisions, it is used.||To forecast economic or financial patterns in the future, econometrics can also be used.|
STATISTICS Vs ECONOMETRICS
We can distinguish statistics and econometrics from one another by their core academic areas of study. Applications of mathematics are the main topic of statistics. So, economics includes econometrics. Additionally, statistics encompasses a broad field of study. Although statistics are a part of econometrics, its scope is less extensive.
Econometrics needs statistical models and statistics to be useful. But, it does not stop with them. It also includes economic theory and mathematics, both of which are essential components. Only one specific area of the scientific discipline is covered by the statistics employed in econometrics. Additionally, econometrics covers more topics like time series and causal inference.
Limitations of Statistics
Statistics have some limitations. The following are the main limitations of statistics:
- Statistical laws are not exact
- Statistics are liable to be misused
- Statistics do not study qualitative phenomena
Limitations of Econometrics
Econometrics has some limitations. The following are the main limitations of econometrics
- Sometimes econometrics has been criticized for relying too heavily on the interpretation of raw data without connecting it to established economic theory or seeking causal mechanisms.
- It’s critical that the data’s conclusions can be satisfactorily explained by a theory, even if that involves creating your own underlying processes theory.
- Also, regression analysis does not prove causation, and an association between two data sets could be spurious.
Conclusion: Statistics vs Econometrics
So, this was all about our topic, which was Statistics vs Econometrics. We hope that you have liked what you have read about Statistics vs Econometrics. Moreover, if you need any Advance Econometrics Assignment Help, you can contact our experts and get help at a very reasonable price.
Read More Articles To Enhance Your Knowledge About Statistics
- How to Solve Probability Problems in Statistics
- Everything You Need to Know About Branches of Statistics
- Top 12 Points Showing The Importance of Statistics
- Difference Between Descriptive and Inferential Statistics
Which is better statistics or economics?
Statistics is the better one for you if numbers fascinate you. Both degrees will need you to work with data, but the statistics one will be more rigorous. Economics is a better choice if you intend to pursue a career in academics or research.
What is the function of econometrics?
The functions of econometrics that are the important ones are typically taken to be hypothesis testing and forecasting.