12.

The following results are for an empirical model

where percentage scores of MSc.FI student at IAA were
modeled as a function of sex (1=Female, 0=Male) and age of the students
(in years):

(1.920) (2.175) (0.033)

F = 14.14 ESS = 154,466.942 n = 123
Standard errors (S.E) are reported under the coefficient estimates. The
regression F-statistic, coefficient of determination , the error sum of
squares (ESS) and the sample size (n) are also reported.
i) Interpret the model and the coefficient of sex.
ii) Compute the t-ratios
iii) Is the intercept coefficient significantly different from zero at 5 percent
level? Why or why not?
iv) On the basis of the results, what variable(s) would you consider
deleting from the model? Give reason(s).
v) Test for the overall significance of the estimated model (i.e test the null
hypothesis ) at 5% level of significance.

13. A researcher obtained the following ordinary least squares (OLS)

estimates for a UK firm’s stock price using 120 observations from 1980
m1 to 1989m12 (All variables in logarithms):
ln st  0.87  0.54 ln pt  0.65ln yt  0.34 ln rt  0.32 ln mt
(1.06) (0.24) (0.30) (0.12) (0.24)

R 2  0.34, RSS  1.24, 4

F115  3.75

st are the log of the stock price, pt is the log of profits, yt is the log of its
output in the UK, rt is the log of expenditure on research and
development and mt is the log of expenditure on Marketing. Figures in
parentheses are standard errors and RSS is the Residual Sum of
Squares.
i) Briefly evaluate the reasons behind including the above
explanatory variables in the regression.
ii) What is the explanatory power of the regression?
iii) Individually using the t-test, test whether each coefficient equals 0,
at the 5% level of significance
iv) Using a t-test does the coefficient on the variable lnyt = 1?
v) Explain why the error term needs to be normally distributed and
how the problem of non-normality can be overcome.