ECON 8740: Applied Statistics and Econometrics

Exercise #6
Practice Problems for Time Series Regression Analysis.1
Shif Gurmu
The file fish.raw contains 97 daily price and quantity observations on fish prices at the
Fulton Fish Market in Manhattan. Definitions of variables are given in file fish.des. Obtain
summary statistics. We will use log(avgprice) - log of average price - as the dependent variable.

1.

A.

Regress log(avgprice) on four daily dummy variables (with Friday as the benchmark) and
the time trend. Write down the estimated equation along the t-ratios. Is there evidence
that price varies systematically within a week?

B.

Now, add the variables wave2 and wave3, which are measures of wave heights over the past
several days. Report the estimated equation along the t-ratios. Are the wave variables
individually significant?

C.

What happened to the time trend when wave2 and wave3 were added to the regression?
What must be going on?

D.

Test for AR(1) serial correlation in the errors of the model estimated in part B Using the
Durbin-Watson test. What is the estimated value of the autocorrelation parameter?

E.

For the model estimated in part B above, test whether there is AR(1) serial correlation in
the errors using a regression-based test. What is the estimated value of the autocorrelation
parameter now? Compare your results and conclusion with those from part D. [Hint: A
regression-based test is described in Lecture Note #8 (see around Equation 36) as well as
around Equation 12 and in Example 12.2 of your textbook, Wooldridge (2013)]

F.

Obtain the Newey-West standard error for OLS estimates in part B, using a lag of 1. How
do the Newey-West standard errors compare to the usual standard errors?

G.

Now, obtain the Prais-Winsten estimates for the model estimated in part B above.
wave2 and wave3 jointly statistically significant?

Are

2.

Please do Computer Problem C2 on page 407 in Wooldridge (2013). Start by providing

the summary statistics of the variables employed in the analysis. [Hint on Part (ii) - The
easiest way to test the given null hypothesis is to issue the appropriate "test" postestimation
command after you re-run the regression from part (i). Alternatively, you can utilize the
trick mentioned in the problem, which is a little bit involved.]

3.

Please do Computer Problem C12 on page 410 in Wooldridge (2013). I have posted the
Stata formatted data set minwage.dta.

Please make sure you do these problems before taking the final exam. Answer keys will be posted below.