IMPORTANT NOTE

As part of your evaluation assignment, you need to answer any

one question of your choice.
Please download and use the answering template available on
step 1.
Kindly elaborate as much as possible.
Econometrics

1.

What happens to the t distribution, when the sample size become very high

a) Collapses to normally distributed spike.

b) Approximates more and more closely a standard normal distribution.
c) Collapses to a spike because its variance becomes very small.
d) Approximates more and more closely a normal distribution with mean one.

2.

If two variables, X t and Yt are said to be cointegrated, which of the following statements
are true?

i) Y
X t and t must both be stationary.
ii) Only one linear combination of X t and X t will be stationary

iii) The cointegrating equation for X t and Yt describes the short-run relationship
between the two series.
iv) The residuals of a regression of Yt on X t must be stationary.

A) (ii) and (iv) only

B) (i) and (iii) only
C) (i), (ii) and (iii) only
D) (i), (ii), (iii) and (iv)

3.

To consider stationary for an autoregressive process:

A) The roots of the characteristic equation must all lie inside the unit circle
B) The roots of the characteristic equation must all lie on the unit circle
C) The roots of the characteristic equation must all be less than one in absolute value
D) The roots of the characteristic equation must all lie outside the unit circle

4.

The hypothesis test used to examine the existence of heteroscedasticity depend on the

a) F distribution
b) Students t distribution
c) Chi square distribution
d) Normal distribution

5.

A specification is given as follows:

y   x   Male+ Female+ Weekday+ Weekend+

a) There is perfect collinearity

b) There is no perfect collinearity but low collinearity
c) There is multicollinearity
d) As the intercept has been omitted, there is no problem with the specification.

For the given MA process, what are the characteristic roots are:

yt  3ut 1  ut 2  ut

a) 3 and 4
b) 0.5 and 1
c) 3 and -0.5
d) 2 and -3

Ans: Option B