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# UNIVERSITY OF SOUTHERN CALIFORNIA

Department of Economics
ECON 414 Introduction to Econometrics
HW #1

Student Name:_____________________

Solve the following problems. Please write the answers in the spaces provided on the HW.
Attach your work to the HW. Answers with no supporting calculations will not receive any
credit.
1. Given the distribution of the following variable (X), find the mean, E(X), and the variance of
the variable V(X).
X:
Probability:

10,
.1,

6,
.15,

5,
.3,

8,
.2,

a. E(X) =

__________________

3,
.05,

4,
.1,

4.5
.1

What does E(X) represent? ____________________________________________________
b. V(X) = ____________________
What does V(X) represent? ________________________
c. Y is a variable with E(Y) = 5, V(Y) = 28, and E(XY) = 15.2 .
d. Find E(Z), where Z = 10X + 3Y ____________________________________
e. Find V(Z). _______________________________
f. Find covariance of X and Y. __________________
g. Find the correlation coefficient between X and Y.
2. Data on X and Y and their probabilities P(X) and P(Y) is given below:
X:
5, 8, 10, 16
P(X): .2, .3, .4, .1

Y:
2, 4, 6, 8, 15
P(Y): .1, .05, .15, .4, .3

a. Find E(X) ___________________ &

V(X) _________________

b. Find E(Y) ___________________ &

V(Y) _________________

c. Find E(5 + 3X) ____________

d. Find E(2X - 2Y) _____________

e. Find E(5XY) _______________

f. Find E(X2)__________________

g. Find V(2 + 4Y) ____________

h. Find V(5X - 2Y) _____________

i. Find V(X*Y) _______________

j. Find rx,y _________________

3. Given that E(X) = 5, E(Y) = 8, E(X2) = 68, E(Y2) = 75 and rx,y = .75, find the followings.
a. Find V(X) _________________

b. Find V(Y) _________________

c. Find E(5 + 3X) ____________

d. Find E(2X - 2Y) _____________

e. Find E(5XY) _______________

f. Find E(3X2)__________________

g. Find V(2 + 4Y) ____________

h. Find V(5X - 2Y) _____________

i. Find V(X*Y) _______________

j. Find Cov(X,Y) _________________

4. A random sample of 100 observations from a population has a mean of 60 and a population
standard deviation of 18.
a. What is the point estimate of the population mean? .......................................
b. What is the interval estimate of the population mean (α=.05)? …………….
c. What is the point estimate of the population variance? .............................
d. What is the interval estimate of the population variance (α=.05)? …………….
e. What is the point estimate of the standard deviation of the population? ........................
f. What is the point estimate of the standard deviation of the sample mean? ........................
5. Ten observations on the students’ number of hours of study a day and their average grade for
the quarter has resulted in the following data:
Hours of Study:

3
2

8
4

5
3

2
3

3
2

5
4

7
3

9
3

1
2

7
4

a- Find the correlation coefficient between the two variables. __________
What does it imply? ________________________________________
b- Run a regression between the two variables and write the regression results in standard
form.

c- Do a comprehensive analysis of the relationship between the two variables
d- What is the effect of an hour of increase in study time on the students’ grade? _______
e- Do a forecasting of average grade for a student who studies only 4 hours a day. ________
f - Write a 95% confidence interval for the forecast. _______________________________
6. In a study of 20 observations for the production technology of XYZ corporation the summary
statistics for the relation between production (Q) and labor input (L) are given as:
Σ L = 320

Σ Q = 1360

Σ L2 = 103680

Σ Q2 = 1836000

Σ LQ = 436000

1- Do an OLS estimate of the production function and find the estimated coefficients.

2- Find the relevant statistics of the regression and write the results in standard form.

3- XYZ is part of an industry that the marginal product of labor in the industry is 4 units.
Do a hypothesis test (at the .05 level) that XYZ’s marginal product of labor is no
different from the industry’s.

4- Write a 95% confidence interval for the estimated coefficient of L.

5- Do a forecasting of output if the labor input is 50 units.

6- Prove that the estimated coefficient of X in the regression of Y = ßo + ß1X + u is BLUE
(Best Linear Unbiased).

7. Prove that the estimated residuals from the linear regression and the corresponding sample
values of X are uncorrelated. That is, ΣXiei = 0, where ei is the estimated values of regression
error.

8. Prove that in a two-variable regression model Y = ßo + ß1X + u, the R2 is the same as the
square of the correlation coefficient between X and Y.

9. What is the effect on the estimated coefficient ß1 on the regression of Y on X, Y = ßo + ß1X +
u:
a- if X is scaled by a factor of k. ____________________
b- if Y is scaled by a factor of k. ______________________
c- if both X and Y are scaled by a factor of k. ______________________

d- What will be the effect on the standard error of the coefficients, the t, F, and R2 statistics
if the variables are scaled by a factor of k? __________________________________