Parameter Estimation and Evaluation Population and Distribution Model Population and Distribution Model Example 1(8.1)[Discrete Choice Probit and Logit Models] The Probit and Logit models are popularly used when a de- pendent variable has binary outcomes,i.e.,there are two pos- sible outcomes 0 and 1.Examples include whether or not an individual is employed,whether or not a consumer makes a purchase,and whether or not a financial crisis (e.g.,default risk)occurs. A probit model assumes P(Y=1X)=Φ(01+02X), i=1,···,m, where (is the N(0,1)CDF,and Xi is an explanatory vari- able. 1 A logit model assumes P(Yi=1Xi)= 1+e-(01+02X) Parameter Estimation and Evaluation Introduction to Statistics and Econometrics April 21,2020 71207Parameter Estimation and Evaluation Parameter Estimation and Evaluation Introduction to Statistics and Econometrics April 21, 2020 7/207 Population and Distribution Model Population and Distribution Model Example 1 (8.1) [Discrete Choice Probit and Logit Models]