Econometrics I

Research Paper

Kamran Sadigli

Rauf Zeynalli
 Introduction
Students and instructors are wondering about the effect or the relation between the high
school GPA and the college (university) GPA through the years. For students, educators, and
higher education institutions, high school course grades are crucial academic performance
markers. Nonetheless, academic test results are frequently regarded as more reliable and
objective indicators of academic preparation than students' grades because all students are
evaluated on the same tasks under the same conditions. One fundamental assumption behind the
emphasis on test scores in policy and practice is that college admission tests are reliable and
consistent predictors of preparedness. However, the focus on test scores over grades in policy
and practice recommendations contradicts research suggesting that high school grade point
averages are stronger predictors of college outcomes than test scores. Some prior studies show
that high school GPAs are more predictive than Achievement Test Score or SAT to predict
college freshman GPA or graduation. However, according to College Board, "Combination of
grades and test scores is the best overall guide to selecting students who are likely succeeding in
college". In this paper, first of all, we will start with data description and will explain bivariate
regression, then will jump into the multivariate regression analysis. After this analysis, we will
try to understand the relationship between College GPA and other significant variables. Based on
our research, we expect to have positive relathionship between College GPA and High school
GPA. Apart from that, we think there are some other reasons can affect positively to College
GPA such as, number of skipped classes, having computers, and graduating from prestigous high
school.
Thus, the purpose of our project is to understand the significance of the High school GPA
and Achievement Test Score on predicting College GPA. The empirical analysis will provide all
the necessary information to get the results which will make everything clear. The paper aims to
analyze the cross-sectional data to get the more clear result to answer this question – "Does High
school GPA, Achievement Test Scores, and other variables are directly proportional to college
GPA?".

Literature Review
The relationship between college GPA and university entrance exam and high school
GPA is among the most studied topics among researchers. Previous studies depict that most
researchers concluded a positive relationship between high school GPA and university entrance
exam on college GPA. On the other hand, several studies show that the relation between ACT
score and college GPA is not that significant, and some researchers find out that there is no
correlation.
A research carried by Joel. O and Kimberly (2017), using data from 2 different CSM
college programs in the USA, demonstrate assessment of student's undergraduate year
performance and the university admission score. Researchers applied correlation and regression
analyses to find out the relation and predictivity between 2 score variables. At first, data
contained 160 students (N=160) but removing some outliers and errors decreased to 155.
Researchers used three years of admission data starting from 2013 to 2015. The authors took
UGPA (undergraduate GPA) as the dependent variable and ACT score as a primary independent
variable in the study. Apart from these two variables, researchers used some other variables such
as work experience, high-school GPA. As in other previous studies on this topic, authors used
ordinary least square (OLS) to explain variance in university performance. Also, in this study,
researchers didn't use randomly selected data since they chose only students who are already
studying in the two mentioned programs. Researchers found that ACT scores were statistically
significant after rejecting the null hypothesis, making it a helpful predictor. Analyzing the linear
regression model, researchers fail to reject the hypothesis that the excellent performance of
students in the CSM program depends on ACT score. The authors came to the conclusion that
university entrance score is a reliable and valid predictor for long term academic performance in
CSM programs.

Another research conducted by (Radunzel & Noble, 2012) indicates that there is a
positive relationship between high school GPA and college GPA. Apart from individual
researchers, the ACT office officially conducted several reports mentioning that entrance exam
scores are the most valid predictor of student's academic performance in future. The study
concluded that those students who got higher ACT scores were considerably had more chance to
complete their degree on time.

However, most studies show a positive relationship between these variables. A study
carried in the USA by Soares, 2012, between 890 students from 6 different universities found
that the relationship is not that significant as mentioned in previous studies. Soares also used
college GPA as the dependent variable and ACT score as the primary independent variable. He
also used different independent variables such as the number of class missed during high school
and student grades from math during high school. Most importantly, Soares states that more
than entrance exam score, grades from math are a much better predictor of academic GPA at
college.

Data Description
To analyze the relation between college GPA and high school GPA, we used "GPA1"
cross-sectional dataset contains 141 observations.
In this analysis, we have used one dependent and five independent variables for our
empirical analysis. For our research question, College GPA (colGPA) has been selected as the
dependent variable. The main independent variable is high-school GPA (hsGPA). The below
table provides detailed data of our selected variables:
Table 1: Data Description
 Variable Name Variable Description
colGPA MSU GPA
hsGPA High school GPA
ACT Achievement test score
PC =1 of pers computer at school, = 0 of pers not
computer at school
skipped avg lectures missed per week
gradMI =1 if Michigan high school, = 0 if not
Michigan high school

First of all, we did not use encode command because we do not have string variables in
this dataset. In this part of the analysis, we have two dummy variables: PC and gradMI. Firstly,
for creating dummy variables, we tabulated PC and gradMI.

=1 of pers | Freq. Percent Cum.

computer at |
sch
0 81 60.45 60.45
1 53 39.55 100.00
Total 134 100.00

=1 if Michigan high Freq. Percent Cum.

school

0 16 11.94 11.94
1 118 88.06 100.00
Total 134 100.00
Before the analysis, we need to check possible outliers and found that ACT has some outliers. To
find potential outliers first, we scattered colGPA and hsGPA, and we dropped hsGPA less than
2.7. Secondly, we scattered ACT and skipped variables and dropped for ACT variable which less
than 17 and more than 32, and for skipped we need to drop average lectures skipped more than
4.5.
Table 2: Summary Statistics
Variable Obs Mean Std.Dev Min Max
colGPA 134 3.059702 0.3709608 2.2 4
hsGPA 134 3.419403 0.3009952 2.7 4
ACT 134 24.16418 2.575752 19 31
have_pc 134 0.3955224 0.4907974 0 1
mch_grad 134 0.880597 0.3254789 0 1
skipped 134 1.020522 0.9990825 0 4

Our summary statistics table shows that our dependent variable ranges between 2.2 and 4,
indicating that our dataset includes both low and high GPAs. For example, the average
dependent variable (college GPA) is 3.05, an average explanatory variable (hsGPA) is 3.41. It is
worth mentioning that, we removed very low and very high ACT scores, an average ACT score
in our table 24.1, range changes 19 and 31, average skipped class per week is 1.02 and range
changes between 0 and 4.
We can check normality with Shapiro-Wilk W test. As we can see from the table, college
GPA, High school GPA and achievement test score are normally distributed, because their
prob>z is bigger than 0.05.
H0 = variable is normally distributed
Ha = variable is not normally distributed,
we reject H0 if prob>z > 0.05
 Variable Obs. W V Z Prob>Z
ColGpa 134 0.98278 1.820 1.349 0.08867
HsGpa 134 0.99339 0.699 -0.808 0.79040
ACT 134 0.99178 0.869 -0.316 0.62406
Skipped 134 0.93990 6.351 4.166 0.00002

As we can see from the distribution, College GPA is normally distributed, high school
GPA is also normally distributed, and achievement score is normally distributed. However
average skipped classes per week is right skewed.

For dummy variables, we created pie charts. We can see from the pie chart only 39.55%
of the students have pc and also pie chart shows us that, 88.06% of the students graduated from
Michigan high school.
SLR Assumptions:
1)First SLR assumption is about linearity between the variables. As we see from the fitted values
relationship between college Gpa and High School GPA is linear.

2) Second SLR assumption states that, our data should be collected randomly, however, as we
know from the data description, we did not collect the data by ourselves, so therefore, we can not
surely tell that our data is collected randomly. Finally, we can not say that SLR 2 is holded.
3) Third SLR assumption says that, sample outcomes should not be all the same value. As we
saw from the first assumption sample outcomes are not all the same values, so SLR 3 is holded.
4) Fourth SLR assumption is satisfied in our model as E(u x), error term is independent from
explanatory variable.
5) The final SLR assumption is satisfied as we saw from the heteroskedasticity test as we
conducted. The error u has the same variance as given any value of the explanatory variable.

Empirical Analysis (Bivariate Regression)

 First of all, as we mentioned before, we have used five independent variables that may
influence college GPA. Our empirical analysis starts with a linear equation as below:
colGPA = β 0 + β 1*hsGPA+ β 2 shsGPA+ ε
To start our empirical analysis, first, we did bivariate regression for our dependent, main
independent and square of main independent variable
colGPA = 9.224067 - 4.132889*hsGPA+ 0.6762422shsGPA + ε
We get initial results as shown below in table 4 after our simple regression. So, the initial
outcome depicts that one unit increase on hsGPA will increase colGPA by 0.4784.

Number of obs = 134

F(2, 131) = 14.93

Prob > F = 0.0000

R-squared = 0.1856

Root MSE = .33731

colGPA Coef. Std. Error t P>|t| [95%

Conf.Interval]
hsGPA . -4.132889 . 1.947185 -2.12 0.036 -7.984886
-.2808925
shsGPA .6762422 .2851961 2.37 0.019 .1120563
1.240428
_cons 9.224067 3.306532 2.79 0.006 2.682958
15.76518

First of all, we need to check whether there is a heteroskedasticity issue with the Breusch-Pagan
test:
H0 = there is no heteroskedasticity issue
Ha = there is a heteroskedasticity issue,
we reject H0 if p-value < 0.05
Now we will use estat hettest command to find p-value:

Chi2(1) 0.63
 Prob>chi2 0.4262

From the table we see that our p-value is 0.4262, which is higher than 0.05. This indicates that
we fail to reject H0 and conclude that we have no heteroskedasticity issue.

Decision-making rules:
There are 3 methods of decision making rule for T-test. The first one is T statistics:
H0: βi = 0 (statistically not significant)
Ha: βi : is not equal to 0 (statistically significant)
We will reject H0 if tstat > tcritical
T stat is equal to coefficient / standard error which is -2.12 and 2.37. To find t critical, we
need to look at the T distribution table. Degrees of freedom in this case is 132. We need to
check-in table 2 tailed test and 0.05 significance level. We will get 1.96. Our t-stat for both
variable bigger than t-critical, so we reject H0 and it means hsGPA and shsGPA are statistically
significant on colGPA.
The second method for decision making is p-value. We reject H0 if p value is less than
alpha (alpha is a significance level. Our p value is 0.036 and 0.019 and the significance level is
0.05, so we reject H0 and get the same result).
Third method is the confidence interval. We need to reject the H0 if confidence interval
does not contain the 0. Our confidence interval is -7.984886 -.2808925 As we can see from here,
our confidence interval does not contain zero and we need to reject H0.
When we find partial derivative of our regression we see that our result is not logical. Our
first partial derivative is . -4.132889 + 1.3524844hsGPA. The mean of hsgpa which is 3.419403.
Now we will insert mean into the equation and : -4.132889 + 1.3524844*3.419403=0.4918002.
Because we have coefficient of hsGPA<0 and shsGPA>0 we will have U shaped parabola. In
order to find turning point we will divide 4.132889/1.3524844= 3.055775. Increase in hsGPA
under 3.05 will decrease colGPA(we assume it is because of error in data). So we conclude that
one point increase in hsgpa if it is higher than turning point (3.05)will rise colGPA by
0.4918002.
In conclusion we can say that, hsGPA has statistically significance on colGPA.
Our standard coefficient interpretation will be:
1-point increase in high school GPA, is expected to increase college GPA by 0.4918002 (if it is
larger than 3.05).
MLR Assumptions:
 For efficiency of our research, it has to meet Gauss Markov Assumptions or best linear
unbiased estimators. Now we will provide detailed information about five MLR assumptions
one by one:
1) From our population sample it is evident that the relation between independent and dependent
variables are linear.

2) Second MLR assumption states that we should have a random sample of n observations in our
population model. As we discussed on the data description part, we didn't collect data by
ourselves and used "GPA" dataset for our research, which can lead to our model not fully
meeting MLR 2 assumption. Because we don't have detailed background about how data
collected we can not fully say it doesn’t meet.
3) Third assumption of MLR states that there should not appear any collinearities between
explanatory variables is also meet by our dataset. On empirical analysis part we did
multicollinearity test and observed that the given table shows values that less than 10. Thus result
allows us to mention that we don’t have perfect collinearity between independent variables in our
data.
Variable VIF 1/VIF
ACT 1.18 0.844671
hsGPA 1.18 0.848497
have_pc 1.06 0.945859
skipped 1.06 0.946372
mich_grad 1.02 0.984743
Mean VIF 1.1

4) Fourth assumption of MLR is also satisfied in our model.

5) Fifth assumption of MLR states about homoskedasticity which means there should not be any
relationship between independent variables and variance of unobserved factors. We will easily
meet this assumption by just using the Breusch-Pagan test. We did this test on empirical analysis
part using test and reject H0 which means we had heteroskedasticity issue to solve that we used
robust command.
 Multiple Linear Regression
However, to get a clearer result of the relation between hsGPA and colGPA we need to include
more explanatory variables in our regression. As we mentioned before, we have five independent
variables that can influence college GPA. Our empirical analysis will be done by cross sectional
dataset by using linear estimation. As shown below is our first linear equation:
colGPA = β 0 + β 1*hsGPA+ β 2*ACT + β 3*have_pc + β 4*mch_grad + β 5* skipped + ε
Before regression we have to check if there is a heteroskedasticity issue:
H0 = there is not heteroskedasticity issue
Ha = there is a heteroskedasticity issue,
we reject H0 if p value < 0.05
We need to use estat hettest command to find p value:

Chi2(1) 4.03

Prob>chi2 0.0447

Using the Breusch-Pagan test we find that there is a heteroskedasticity issue. From the table we
see that p value is smaller than 0.05 so we reject H0 and discover that we have heteroskedasticity
issue. To solve heteroskedasticity issue, we use robust command. Also, we checked whether if
our model has a multicollinearity issue. For that we used the VIF command. We found no
problem because of shallow vif values (lower than 10).

Variable VIF 1/VIF

ACT 1.18 0.844671
hsGPA 1.18 0.848497
have_pc 1.06 0.945859
skipped 1.06 0.946372
mich_grad 1.02 0.984743
Mean VIF 1.1

reg colGPA hsGPA ACT skipped have_PC mich_grad, robust

 colGPA Coefficient Standart T statistics P value Confidence Interval
Deviation
hsGPA 0.3932372 0.1143496 3.44 0.001 0.1669771 0.6194974
ACT 0.183072 0.120894 1.51 0.132 -0.0056137 0.0422281
skipped -.0883878 0.0285168 -3.10 0.002 -0.1448131 -0.0319625
have_PC 0.1063925 0.0612556 1.74 0.085 -0.014812 0.2275971
mich_grad 0.1770632 0.0879402 2.01 0.046 0.0030584 0.3510679
_cons 1.164886 0.4177595 2.79 0.006 0.3382777 1.991495
Number of observations = 134
Prob > F = 0.0000
F( 6, 89) = 8.98
R squared = 0.2742
Our multiple linear regression is:
colGPA = 1.164886 +0.3932372*hsGPA+ 0.183072*ACT -0.0883878* skipped + 0.1063925
*have_pc + 0.1770632*mch_grad + ε

Interpretations:
1 point increase in high school GPA, is expected to increase college GPA by 0.3932372under
ceteris paribus condition.
1 score increase in achievement score, is expected to increase college GPA by 0.183072under
ceteris paribus condition.
1 more missed lecture per week in skipped, is expected to decrease college GPA by -0.0883878
under ceteris paribus.
Students with PC is expected to have 0.1063925 more college GPA than students without PC,
under ceteris paribus condition.
Students who graduated from Michigan high school are expected to have 0.1770632 more
college GPA than students who have not graduated from Michigan high school under ceteris
paribus.
From our regression table R square is equal to 0.2742 which means that 27.42% of
variation in college gpa explained by explanatory variables

We have seen that, only skipped variable has negative impact on college GPA. From our
table, we can report that, high- school GPA, number of missed classes per week and graduating
from Michigan (prestigious high school) have statistically significant college GPA at 5%
significance level. Now, we will conduct t-test for each independent variable to find if they have
individual significant impact on college GPA. So, we will have these hypotheses for each
explanatory variable:
H0: β I = 0 (Independent variable does NOT have significant effect on college GPA)
H1: β I ≠0 (Independent variable has significant effect on college GPA)
We have 3 methods to test whether it has significant impact: p value, t statistics, and confidence
interval.
P value test
First of all, we are checking high-school GPA. Our decision-making rule is that, when p
value is less than 0.05 (significance level), we reject null hypotheses and conclude that the
independent variable will have a statistically significant effect on the dependent variable. As we
see from the table p value for high school is 0.001, which is less than 0.05, we reject the H0 and
conclude that high-school GPA is statistically significant on college GPA.
Second independent variable is ACT, now we are conducting p test for ACT. As we see
from the table, p value for ACT is 0.132, which is higher than 0.05, so we do not reject H0, and
conclude that, ACT has not statistical significance on college GPA.
Third independent variable is skipped, now we are conducting p test for skipped. As we
see from the table, p value for skipped is 0.002, which is less than 0.05, so we reject H0, and
conclude that, skipped has statistical significance on college GPA.
Fourth independent dummy variable is have_pc, now we are conducting p test for
have_pc. As we see from the table, p value for have_pc is 0.085, which is higher than 0.05, so
we do not reject H0, and conclude that, have_pc has not statistical significance on college GPA.
Our last independent dummy variable is mich_grad, now we are conducting p test for
mich_grad. As we see from the table, p value for mich_grad is 0.046, which is less than 0.05, so
we reject H0, and conclude that, mich_grad has statistical significance on college GPA.

T-Test
After finishing with p test, we will start working on t test. Our decision-making rule will
be:
H0: β I = 0
H1: β I ≠0
Now we will calculate from using critical values of t distribution table. We will have 2
tailed test with 0.05 significance level at 134 - 5 – 1 = 128 degrees of freedom, which we will
take 1.960 from table as our critical value. We will reject H0 if tstat > tcritical.
 We will start with the high-school GPA independent variable. From table we see that t
statistics for high-school GPA is 3.44, which is higher than 1.96. In conclusion, we reject the H0,
and conclude that, high-school GPA is statistically significant on college GPA.
Second independent variable is ACT. For ACT, we have t statistics which is 1.51. So, we
see that, 1.51 is less than 1.96. Therefore, we conclude that, we fail to reject H0, so ACT has not
statistical significance on college GPA.
Third independent variable is skipped, and from the table we have -3.10, we see that,
absolute value of -3.10 is higher than 1.96, so we can indicate that, skipped is statistically
significant on college GPA.
Fourth independent variable is have_pc, and from the table we see that t statistics is 1.74,
which is less than 1.96, so we can indicate that, have_pc is not statistically significant on college
GPA.
Final independent variable is mich_grad, and from the table we can demonstrate that t
statistics is 2.01, which is higher than 1.96, so we can indicate that, mich_grad is statistically
significant on college GPA.

Confidence Interval Test

For the confidence interval test, our decision making rule will be, we reject null
hypothesis, if confidence interval does not include zero.
H0: β I = 0
H1: β I ≠0
First of all, confidence interval of high- school GPA is (0.1669771 0.6194974), we
obviously see that 0 is not included in this interval, so we will reject H0, which indicates that,
high-school GPA is statistically significant on college GPA.
Secondly, the confidence interval of ACT is (-0.0056137 0.0422281). We obviously see
that 0 is included in this interval, so we will fail to reject H0, which shows that ACT has no
statistical significance college GPA.
Our third independent variable is skipped, confidence interval of skipped is (-0.1448131
-0.0319625), we obviously see that 0 is not included in this interval, so we will reject H0, which
indicates that, skipped is statistically significant on college GPA.
Confidence interval of have_pc is (-0.014812 0.2275971), we obviously see that 0 is
included in this interval, so we will fail to reject H0, which shows that, have_pc has not statistical
significance on college GPA.
 Our last independent variable is mich_grad, confidence interval of mich_grad is
(0.0030584 0.3510679). We obviously see that 0 is not included in this interval, so we will
reject H0 indicates that, mich_grad is statistically significant on college GPA.

F-Test
H0: β2 = β4 =0 (Achievement test score, and having PC are NOT jointly significant)
H1: β2 ≠ β4≠ 0 (Achievement test score, and having PC are jointly significant)

Rejection rule is, we reject H0 if p value < 0.05, here in F test p value is equal to Prob >
F. Now we will run “test” command in Stata. Based on our result, 0.0406 is less than 0.05, so we
will reject H0 and conclude that ACT and have_pc variables are jointly significant and impact
college GPA. Since these variables are jointly significant, we will not remove them from our
regression.

F(2,128) 3.28

Prob>F 0.0406

Regression with Multiple Dummy Variables

Finally, we added 4 multiple category dummy variables to our model. These variables are
soph, junior, senior, and senior5. Our regression with all variables will be following:
Number of obs = 134

F(8, 125) = 5.99

Prob > F = 0.0000

R-squared = 0.2771

Root MSE = .32534

colGPA Coef. Std. Error t P>|t| [95%

Conf.Interval]
hsGPA .3834504 .1030785 3.72 0.000*** .1794453- .5874
555
ACT .017277 .0121007 1.43 0.156 -.0066719- .041
2258
skipped -.0905978 .029207 -3.10 0.002 -.148402-
-.03279
have_pc .1051445 .0596237 1.76 0.080 -.0128581- .223
1472
 mich_grad .18051 .0878104 2.06 0.042 .0067223-.3542
977
soph .0988459 .2160831 0.46 0.648 -.3288093-.5265
011
Junior .0057805 .1050255 0.06 0.956 -.2020781- .213
639
Senior -.021593 .1028936 -0.21 0.834 -.2252323-.1820
462
Senior5 0 (omitted)
_cons 1.2293 .4004439 3.07 0.003 .4367722-
2.021828

First of all, senior5 is a base category in our model. As we from the table senior5 variable is
omitted because of the collinearity, so we drop this variable from the table. When we added new
multiple category dummy variables, we observed that, some variables became jointly not
significant (P>|t| > 0.05). So we need to test these variables.
test ACT have_PC soph junior senior
( 1) ACT = 0
( 2) have_PC = 0
( 3) soph = 0
( 4) junior = 0
( 5) senior = 0
F( 5, 125) = 1.39
Prob > F = 0.2330

Prob > F is bigger than 0.05, so they are not jointly significant, that is why we need to remove
these variables from the model. Our final model will remain with college GPA, high school GPA
(hsGPA), skipped and mich_grad variables. Our final regression model will look like:
Number of obs = 134

F(3, 130) = 13.46

Prob > F = 0.0000

R-squared = 0.2369

Root MSE = .32776

colGPA Coef. Std. Error t P>|t| [95%

Conf.Interval]
hsGPA .4601156 .0953377 4.83 0.000*** .2715015- .6487
298
skipped -.0932944 .0286354 -3.26 0.001 -.1499462-
-.0366426
mich_grad .1831479 .0876467 2.09 0.039 .0097493 -
.3565465
_cons 1.42031 .3463476 4.1 0.000*** .7351029-
 2.105518

Conclusion
In conclusion, the paper aimed to understand the effect of high school GPA on college
GPA. We used cross sectional data set with 134 observations. We used STATA to regress and
find the relationship between high school GPA and college GPA. Also we used different
variables such as number of skipped class per week, ownership of PC by the students,
achievement score, and whether graduating from prestigious high school such as Michigan high
school. Moreover, we checked collinearity and used three methods of checking statistically
significance, also, F- test to indorse the efficiency of the interaction term for regression analysis.
Finally, to check homoskedasticity, we used the Breusch-Pagan test. After these analysis, we
added multiple dummy variables to our model. After that, we checked the significance of these
variables and saw that, some of these variables are not jointly significant, so we removed those
variables from our final model. The final results and outcomes of the research can be stated that
high school GPA has a significant positive impact on college GPA.
References: 
1) Joel O. Wao, Kimberly (2017). SAT and ACT Scores as Predictors of Undergraduate
GPA Scores of Construction Science and Management Students.

2) High School GPAs and ACT Scores as Predictors of College Completion: Examining
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(https://journals.sagepub.com/doi/full/10.3102/0013189X20902110)
3) Noble, J. (2000). Effects of differential prediction in college admissions for traditional
and nontraditional-aged students (ACT Research Report Series 2000-9). Iowa City, IA:
ACT.
4) Soares, J.A. (Ed.) (2012). SAT wars: The case for test-optional college admissions. New
York, NY: Teachers College Press.