EAR REGRESSION of ordinary ferst ‘Derive the Jine of best fe Y= Aj +X, +m, using the method of ON ‘squares, that P=, + 2,X. Hex, =0 ) (ay y=F € e fi oes JAX, +i, on depends on effect of age on ‘monthly wages. W (in Rupee*) earned by a ‘yeors), Write an appropriate model 10 study ¢ following data on X and Y. Pease. ° aoe ia 11 mated regression equatiogféaing oreinarppleast square whose wv 4 . u ‘ ‘Milly consumption Expenditure near regression model, 120 140 155 150 240 © 260 , for the following data;- eee) 3 4 60 70 80 90 errors of intercept and slope coefficients, of observation of X and 5 xy i } =3240, Sy? =1330, which is imptions of CLRM, them obtain .establish 95% contidence intervals for fi, and Py the following data, 0.27; = $070, YX, = 5,60,000, LY,X, = 30.55,50,000. 47,60,00,00,000, 2.¥,? = 26,07,000 Fitthe linear regression ¥, =f), + Ay X, "Find SE (A ) and (A) Find 95% confidence intervals of slope and inter “Test the significance of slope coe'ficient at 5% pt coefficients 24 e =o) follow: thes iel S confidens BPaand intergept coefficients. fic’ if Is. of ven regression model answer the question that ce ce repr x, hypothesis and test a 5% level significance, tail or two tail and why? ‘(in thousand rupees) of houses was studied to ware feet) SOFT, that i sin (Ph. 8000 61 8000)‘the results on the bas of a sample of Hh ober Price = 82.951 + 0.13875 SQFT Se (3729) (0.019) Re = 082 ti) Interpret the result 7 (i) Test the significance of ci { confidence interval ow Comment upon the overall significance of the jon was run between per capita savings (8) and Fe pepe ae ore. (in ‘i alts ygre obtained 10,000 households in a city and the following : + 0.67 ¥, 105) (0.011) : st is the economic interpretation of regression ‘you think about the sign of constankjgr™ ‘and ft, writing the hypothe Iaf both the coefficients at 5% level significance tion expenditure (y) and gross dollar for the years 1982 to 1991 Fintervals of regression coefficients. and B, writing the hypotheses. claims that expectation are in based ie the equal to the actual values of the variable under to see the validity of this claim with reference to feasury bill for 30 quarterly observations of the rational expectation hypotheses at ; linear regression model are satisfied. 04444848 } I 7 of ee ee Se % 4094 os Nest hess eeKurtosis 6.432967 No of observations a79 J fon was collected on daily changes in rupee (Distribution A) aa oy ‘ont helty (Distribution B) for a six month period (150 days) and following, m maize results. Distribution A Distribution B 39.29 10.53 d deviation 817 8.24 038 178 261 624 ‘which of the following distribution is normal ‘was run between gross private domestic inves id gross tic production (X) all measured in billion of doll year 19BR to 1991 following, results were obtained 106498" +0.3016 X. (257.5874) (0.0399) 0872 : lions of dollars. ins of dollars. te domestic investment (y) and gross billion of year 1997 to 2001 and the by finding both the parameters their standard error tion in the following cases. are measured in millions of dollars. 0 and GDP in millions of dollars. and GDP in billions of dolla: equation using OLS if Y is regressed on X with an equation using ordinary least squares when pt term. data. in (Ph. 8000 61 8000)ep mar a oo paay mo fm fos 0 ne er ng =EEERUEBDO ET - PEUUCEERE ‘smoyos se unos sun eR} 8 41 wOROUEEE FEU K EERE EERE ED DD PUTT en' i coefficient (©) Test the statistical signifieance of each estimated partial seareaain oe a (ie, the null hypothesis is that individually each true or popula coefficient is equal to zero? (a) How would you test the hypothesis Ul simultaneously zero? that all. partial slope coefficients are = 0.4795x, se=(0.1216) (0.1140) r? =0,6628 MY, =0.7774— 0.2530InX, — se= (0.0152) (0.0494) ‘the cups of coffee consumed per person per aya price of lollars per pound. ret the slope coefficients in the two models, told that Y= 2.43 and ul ace m vali estimate the r? =0,7448 ind for coffee is price del Model A, Model B is preferable to 5 ate and compound growth rate. the slope coefficient /3,? Why or why not? the two r? ing principle in choosing between the two regression‘Fest the manufacturers’ claim, Which model will you prefer? 6 Consider the following regression results (1971 ~ 80) for the model In ¥, = 0.7774 = 0.2530 X, + =(51.14) (5.12) 7?=0.7448, Fy» = 26.27 here Y - coffee consumption (cups per day) of coffee a linear regression model? is the interpretation of 2,7 jould you accept the hypothesis that fis significantly differ ‘one = tail test at the 5% level of significance. Why opriate? it from zero. Use fone — tailed test Mowing d for petrol (¥) depends upon its price X, and iheout Pm | function is to be estimated: Bs logX, +B,logX, + he parameters ,, B, and B, and gig@Meir eeonomis significance mation tor demand for a good was ? 0.876, R =0.843 "sults for a sample of 28 less developed countries are as 9In(¥/P)+ 0.5040 In ogy ~0.0918hnc (15.2437) (2.7449) signs of the vari ici : aan rious coefficients? Are the results==0.6702 + — 0.7256mxX, = (05624) (0.1015) = C1115) (7.1440) = (02676) (0.0001)? =0.8644 e income and ¥, denote Expenditure. ollowing Cobb Douglas producti mi Hin (Z,) + 0.85in (K) € Q, (9.06) gion ci eg on cogffigtents. Will you use a one ~ “of the regression model? Jf, In A+B, nB+B, InC +uwhere both natory variables are in logarithmic form. What is the yus partial slope coefficient? How would you test the egpefficient are simultaneously ero? OF false: For a linear in variables (LIV) model, the slope ‘the elasticity coefficient is variables, the reverse case holds lice in USA as a function of disposable income (X>), price of orange juice(X,), price of mango drink period 1960 - 1982: = 051In X; +0.14In X, + 0.09 In X, (0.00) (0.005) (0.00) 98 -4—0.0056PCG, ~2.2316FLR, } (0.0019) (0.2099) | R =0.6981 csion results. s of regression significant independently and jointly? explanatory variable R? increases to 0.77, Will this imply that able? just ‘ing regression models compute adjusted R* for each the cidle which of these is a better fit. Intercept | Age No. f PR? Bid _|1328,094 | = 0.00 _ [191.6662 | 10.4856 0. | 807.9501 | - 5; 11549 [-1336.019 [12.7413 Ws, .8906 50 compare model thod of restrict leastpound oy spe ep éuOM= linear regression then how would (iii) Ifwe run a linear regression instead of lox the interpretation change. al personal expenditure behaves if to is ‘was obtained: 9, To determine how expenditure on services (Y) . regression model (X) rises by a certain percentage, the follo. Y =-125648 + 1844.22in X, se = (916351) (114.32) “(Interpret the Intercept term (i) Interpret the Slope term (iii) Test the significance of regression coefficients. 70.881 n=32 ‘the following regression results for cross s 55 rural ‘in India. The regressand in this equation is ex} 3 is total expenditure (a proxy for income) = 1283.912 + 257 In (TEXP) = (-4.3848)* (5.6625)"* 1? = 0.376; snotes an extremely small p - value. interpretation of coefficient o! P ou say that Eng Ww is for thigsample? Explain. g Population reBressi i +B, In(Pl Divi paid " gression Fesults for an economy for 2444 quarters d below: tstatistic — Prob-value F- Statistic = 13930.73 b (F- Statistic) = 0.0000 20 ations of B, and f,? be satisfied with t! es g formal tests. For tables take the close een fake the closest value of n. ‘of hourly earnings States for the year re and the civilian to 1969 gives the oe ea e @ } @Ss 22, Write short notes on the following: (Slope and intercept dummies (i) ANOVA Vs ANCOVA and the 23, The data on average salary (in dollar) of public schoo! teachers in 50 Eee a District of Columbia for the Year 1985 was available. These 51 areas are CUS" inte Uinvee Beographical regions: (1) Northeast and North Central (21s aes (2) South (17 states in all), and (3) West (13 states in all). The following, tegression model were obtained from the given data: ee 2615862 1734473p,, — 3264.61.32, (1128523) (1435.953) (1499. (23.1759) (1.2078) (0.0000) « (0.2330) indicates p values, Salary of public school teacher in fate i 8 on public school per pupil ( tate is in the Northeast or Ni u ise (ic, 1 i country] - ) rs in the Northeast and North Central in the South. P =0.0901 Wages, W (in Rupees) earned by ‘A (in years). Write an appropriate model to study the() Dummy variable trap (i) Differential slope dummies. ing examples? 418. What is meant by a dummy variable trap? Explain gi oken at home. Languast ish and Hindi only. e spoken athome has 3 19, tis known that English language SP categories: English only. Hindi only Engh @ nat home. Treat English ) (Define dummy variables to capture language spokel "speaking homes as the base category. “Develop a linear in parameters model that shows English tes 's education and language spoken at home. s you are told that language spoken at hom ‘How will your model in (ii) change? 1 your model in (ii) above, derive the regression ‘homes and compare them. tecoregas a function of r ao & e is influenced e [t@tindard errors in ‘ industry u can carry out White's test for the test statistic, aa Bete ton and degrees critical value for the test and Ri ¥ of regression results based on ordinarydefine another dummy variable Dy = if the democrats and 0 otherwise and estimated th Ye A+ B.D. BX + A(D,X) eu. Derive t Would the standard errors, t~ values and R’ be affect or the period 1961 =! through ey 15, Based on quarterly observations for the United States fo ra estimated 197711, the following demand function for coffee ws — InQ, =1.2789-0.1647 nF, +0.5115 Inf, +0 1483/nP, a. (-214) (1.23) (0.55) — =0.00897°=0.0961, = 0.1570, -0,0097P,, (374) (-603) 037) RK? =0.80 + Q = pounds of coffee consumed per capita relative price of coffee per pound at 1967 pices sr capita PDI, in thousands of 1967 dollars lative price of tea per quarter pounghat pentane Cee 1 pplemgntaty products? r 2 gmand for coffee? sis that the income elasticity of demand for coffee is represent in this case? iummies in this model? statistically significant> pattern in coffee consumption in the United States? If arter in this example? Would the results change if we e base quarter? y introduces the differential intercept dummies. What de here? ‘that this model is misspecified because it assumes that jables remain constant between quarters. How wouldBD, = Lif nonwhite and non - Hispanic, 0 if otherwise (a) Interpret 2 @) Interpret f, and /, wT 1992, the following regression 11. Tostudy growth of population over the period 1970 ~ * ‘model are estimated. Model I: In(Pop), =4.73 + 0.024" e 1=(781.25) (54.71) Model II: in(Pop),=4.77 + 0.015 -0.075D, + 0.01 “A t (2477.92) (34.01) (17. 03) (25.58 re Pop = population in millions t- trend variable D, = ab: ‘in 1978 and 0 before 1978. fel 1, what is the rate of growth of population ayes th’ ty tae “Are the population growth rates statistically differerfpre - artdgos: me — What are the th 77 and 1978 - otherwi nts the i fon effect. What does this expression 15X, — 0.103(D,x,) 22) (311) R*=094 tion Period and 0 otherwise. the amount of money spent by astate on welfare )+ 4, where D, =1 if the state legislature is e. But your research assistant decided to oo; D, @ Vif female, 0 if maleé - en aagagsaagsssddbLEBDEDVeVUYVVYYY~- ‘51pm sjnsou Butaomi0$ 94 pur A “S0yes ‘yo ae jo 250y0 aun APRIE OF [PROS Spusdop wossod Aq pause 1)1 15 (0.2572) (4.3996)? =0.6594 (}) Whatis the wage floor. Interpret the Slope term. 2 ~ 4 ¥, =-0.2594 4205880 r SS follows: s slope in the reciprocal model analogous to néative slope in the » slope terms of two models. for two models, y testing the coefficients in |For Y = sales of shoes and X = disposable income, which rm A common stock (%) of return (%). slope coefficients In the twoot from the south (0 Whatiis the difference in wage between a married worker from | ‘and a married worker from ee. (ii) What is the difference in wage between a non married worker Yet south and a non married worker from elsewhere, Compare and comment. egression results were 26. Froma sample of 528 persons I May 1985, the following rest ‘obtained: if 88148 + 1.0997D,, — 1.6729D, se (0.4015) (0.4642) (0.4854) ' (21.9528) (2.3688) (-3.4462) Pp (0.0000) * (0.0182)* (0.0006) * R=0.0322 Where Y = hourly wage (8) D, = married status 1 = married, 0 = otherwise D,= region of residence; otherwise and * denotes the p values. Find: (i) Interpret the regressio Test the significance of the gciSAts individually. (Pederal Deposit Insurance ler estimated the following function X, +0.803InX , -0.1755D, + 87) (0.2905) + 0.5634D, — 0.2572), 766 iting was “fair rating was“ satisfactory” lucted jointly with the state e the estimated standard errors. {interpreting the dummy variables in this model of public school teachers in 50 stat c tes and the 89 was available. These 51 areas are classified on o~ @ G Ggall). al (21 states in a into three geographical regions: (1) Northeast and pat cee ee es (2) South (17 states in all), and (3) West (13 states in al l). Tegression model were obtained from the given data: Model A: w - 2615862 - 1734.473D,, = 3264. 2 ; af seo (1128.23) (1435.953) (1499. eH t = (23.1759) (1.2078) G21 s Piece! p-value (0.0000)* (0.2330)* (0.0349) Model B: Yi = 1326911 - 1673514D, - 1144157, se = (1395056) (801.1703) (861.1182) 1 = (9.5115)* (-2.0889)* (1.328 7266 : Indicates p valueless than 5 percent and “indicate greater than salary of public school teacRer in state i 20 observations and D; =1 for the remaining 30 observations. ~’ imated double log model for cigarette consumption 01 29 observations, for the period 1960 - 1988 ‘The is: ‘consumption per adult (dependent variable) ‘GNP in 1968 prices (in tTurkish Liras) cigarettes in Tukish Liras per kg) ~ (D86)+ 0.732 (in Y) +2.602 (D82) (In Y) +-3,99 0.288 (D82) (InP) R’=0.921CHAPTER - HETEROSCEDASTICITY Sy comurent entional t vl (i) If heteroscedasticity is present, the convent invalid.” ssiduals reve 7 ("IF the graphical examination of the resid ee relationship between the squared residuals 0° variables, then there is a possibility of hetero: and F tests are als a systematic the explanatory ‘ing? What is meant by heteroscedasticity? What are its effects on the following (a) Ordinary least squares (OLS) estimators and their variany (b) Confidence Interval, (©) The use of t and F tests of significance. fe or f In the presence of heteroscedasti re Bi inefficient, 4 Hf Ifheteroscedasticity is present, the co tests are invalid. d as well as iduals estimated heteroscedasticity t for detecting heteroscedasticity. on 20 countries, consider the following regression model: P2i+ B3EDUs + tional Product nary Education tiddle-income countries, 5 upper middle, {according to the classification used 5 low income by the World a lat on lassical linear \ formal test to verify your conjecture. State the null pctvare given the following Auxiliary regression‘The residuals obtained from the above regression fi} = -15.76 + 0.3810 GNI ~ 4 5641 EDU; + 0.000005(GNP\)? 40,1328(EDU: ) ~ 0.0050(In GNP, (EDU) R= 0.30 What is your conclusion? 6 Consider the following Model: Bt PX + AX tM Suppose it is revealed to us that this regressio How can we transform the model so that there is, (i) error variances are known (ii) error variances are unknown. wn suffers from heteroscedasticity: homoscedasticity if x [ (a) Corporate profit ‘Net worth Log of net worth Time ‘Would you expect heteroscedasticity to be presentin the| Mm f@s. Canada, and 15 Latin least squares (WLS) is superior to of ~ following methods of detecting tion i i regression function (PRF), suppose the error | the model to achieve homose: n, edastic error variance? transformed model? List the various steps i ssions based on the US. data for o 1946 M8GNP; - 0.4398D, R=0. ae 0 (0.0736) ~ 94315 P_ ai ‘ (0.0597) R= 0.875 expenditure :fan auxiliary regression shows that a particular ;' is high, there 18 definite evidence of high collinearity. High pairwise correlations do not ne ‘multicollinearity. ‘Malticolinearity is harmless ifthe objective of the analysis is prediction only arily suggest that there is high An data involving economic time series such as unemployment, money supply, srest rate, or consumption expenditure, multicollinearity is usually suspected. der the model Yi= Br+ BaXi+ Bx} + BIX? + ui [cost of production and itput. Since X? and X* are functions of X, ther: + coMtifi€arity. Do ‘or why not? y of the production function of the [ffited bricks, pottery, glass, ‘industry for the period 1961 to 1 Hlowixig result obtained. ub + logK R2=0.878 1.285 log H (0.324) 2 = 0.889 the pea eareance of log K variable in Model 2? Beeston coctfic:, pee icient between t and log K is 0.980, @ individually insignificant in Model that in Model 2 Which test would you to scale? 2, would you all partial slopes are use? in weekly consump dollars. tion expenditure (Y), oe oe Meus Beeaeaeaeae teens §CHAPTER ~ MULTICOLLINEARITY Researchers often believe that there is multicollineatt include in their equation, two or more explanatory vari pomp same purpose. Which of the following pairs of va redundant variable? A n (GD Pand NNP ina Macroeconomic equation. oe soeg used ina (i) The number of acres harvested and the a icultural supply function. : i ard wating mac durable goods " d wealth Ina regression of consumption expenditure Ci, on disp g Wy the following results were obtaine ©, = 24.7747 + 0.9415 Y, - 0.0424W, t = 6690) (1.0442) 05261) RO. Degree of freedom = 17. i 2 Suggest ‘How can you use these results to detect the(Bresence of mufficollinearity? Sugg any two methods to reduce the severity of th What are the practical con: coll ity? How do you detect ‘multicollinearity? my wen they acetal vettables that basically serve a nly to include such a in a demand function for 9 you think the following Mibdel suff ulticollinerity? Give reasons. InY; BrinX + al data: 6 8 10 Bs to" 11 15 17 19 2 tiple regression of Y on Xz and Xs the parameters of this model? Why or Why not? meter of combination of parameters can you estimate? the following sentences: © of near multicollinearity, the standard errors of regression its tend to be and the t ratios tend to be f perfect multicollinearity, OLS estimators are a —_____ and their Sof OLS the igh mul collinearity, it is not possible to assess the individual one or more partial regression coefficients.ModelB: ¥, = 047% ~ 0.001271 + 0.0005 R= 0,6629; d = 1.82 t = (327) (2.777) Where Y labor's share and ¢ the time, {a) Is there serial correlation In Model A and in Model B? {b) If there is serial correlation in Model A but not in Model B, what accounts for the serial correlation in the former? _ (€) What does this example tell us about the usefulness of the d statistic in detecting autocorrelation? “Consider the following regression model Y = 494664 + OBB514X2, + 0.0925Xn P= OS = 0.8755 = (=22392) (70.2936) (2.6933) \e personal consumption expenditure (1982 billions| & ) : personal disposable income (1982 billions of dolla Dl) Dow Jones Industrial Average Stock Inde: ons based on U.S. data from 196: regression? How do Reppiéteding regression was tr d, yielding 1 “17.97 + .89X;, P How do you know? ied regressions, the t value of the PDI fed - regression of any value in determining ack thereof, of autocorrelation in the transformed data? lows the AR(1) scheme. How would you transform this itocorrelation in the transformed model?nog Knol Apts, 2 29 21(( (tty "EC ececece reece ~,CHAPTER ~ AUTO CORRELATION for the ere obtained 2 Based on annual data for 1990-2000, the following ren eee ivelue consumer goods industries In studying the producti added. Regression — 1 Yi = 04529 - 0.00417; (=3.9608) R? = 0.5288, d = 0.8252 Regression ~ 11 Ye = 04786 - o.0127r + 0.00057? eae (-3.2724) (2.7777) R= 0.6629, Where Y= labour charge T=time Figures in parenthesis are t-ratios Drepresents Durbin = Watson test statistic (i) _ Is there Serial correlation In regression 12 in ee (i) What accounts for Serial correlation iniffttse regressiOhs, if it is p! To study the effect offlthe index of vacancies (VAG) in US.A for 24 ing results were obtained 7.3084 t (5.8250) Us there a problem of aut equation, you encounter the problem of first-order step by step how, you would attempt to correct this e for United States from 1958 to 1969 the following re; gression 6594, d= 0.6394 ession. Is there any evidence of first order autocorrel lation tocorrelation, estimate the coefficient of first order on for X variable is given as So Rl-o and error then how would we use GLS to correct for Eclasses.in (Ph. 8000 61 8000)) (76.58) R= 0.99 2) would you interpret the two regressions? , is the author assuming in going from Eq, (1) £0 (2)? Was he worried heteroscedasticity? you relate the slopes and the intercept 1 you compare the R? values of two model: 1s of the two models? Is? Why or why not? d for heteroscedasticity the White test yielded the following regression 03810Xx - 45611%. + p.o00005x2 * 0.1928X% ~ 20050Xa% (0.60) (013) (087) (0.56), (0.85) (0.556) (0.895) (0.394) (0.58 (0.400) N= R= 0.23 ‘interpret the preceding regression? the lem of is suggest that regression suff city? How do you know? suffers from heteroscedasticit w Wi ouget rid of it?at into the ight be the reason (s) for transforming the first equation ® . quation? F the objective of the transformation was cedasticity, what assumption has been ma to remove or reduce de about the error ded in removing it? ‘Af there was heteroscedasticity, have the authors succee’ _ How can you tell? the transformed regression have to be run ny not? ' you compare the R? values of the two regressions? Por why not! population density as a function of distanc; hi aes swing regression results based on a samy sug tagpts in 11970: = 0.239%; (12.28) Ro = 0.2258 JX, ¢ %> les frormithe central business district. 1 if ais thepgulRor making about heteroscedasticity in g® ell from the transformed WIS regression that ity, if present, has been removed or reduced? pgpet the regression results? Do they make economic ‘through the origin? Why oF WLS through the origin.) Compare the results of the do you prefer? Why? (W) on the number of employees (N) for a random egression results were obtained:‘an OLS regression of Y on X2 and Xs. there collinearity in this regression? How do you know? r Do separate regressions of Y on Xz and Y on Xs. What do these regressionsAPI aH TTT TASER ur answer . e unit of False, Justify Yor 1. State whether the following statements are True or False, Justify ¥ 2 hanges in th (i) In Tinear regression models, 1° valu i Measurement, a itis dime jones. dition of a variable ina regression mo% Sa iu ett always Jead to a rise in the R? and adjusted Sn oe Nariable is statistically significantly different from zero at 8 O07 atways zero. iy) _ Inthe regression involving standardized variables, the et Beirne a ‘{iv) The correlation coefficient between W = 3X + 2 an ‘between X and Y, invariant to ¢ ions and 4 variables, el with 30 observations ant @ wal a joint Th @ multiple regression model_y, =f) +B.Xn +, pe, restriction Hy :f,=B,=0 is same as testing - Ho: Bs =0 Consider the model ¥=Bi +B.X +B Xs +4, mption increases with age, How would be jer the data supports his hypothesis ? is to assess the relative important of age and Jong term consumption, what model should he estimate ? sured in deviation form ollowing regression y, =B, +B,X., +BX, +u, tandard errors of the slope coefficients Q+34+142) etermine the best location for the adies. The individual decides to lume at each of the restaurant ii next branch of a famous build a regression model in the chain as a functionAll estimates are statist a) Gi) ii) ce per square metre of suburban real estate, ¢= time, if Lis a lockdown month s not a lockdown month ally significant at 5% level of significance. Write the regression functions for lockdown months and non lockdown months. How would you test the hypothesis that lockdown had no impact on price-clasticity for sub-urban housing? result if Dummy assignment is switched as Rewrite the regression below: if tis a lockdown month if tis not a lockdown mont ‘Another investigator believes thatthe relation variables X and Y is given by | + BiXe+ 6. Given Alsample of n observations, the investigatd? estimatésBy by caleufating it as the LA . average value of Y apes by the“average yalué-of X. Discuss the properties of this estimator. What difference would it make if it could be (3x5=15)‘cost function be minimum? put will the han R'? Justify your I (i) At what level of 0 adjusted R. Is adjusted R’ ys less 1 (ii) Compun answer. ‘Test that the variance of per unit cost (o7y) over this 20 year period = 20 against not equal to 20. Use 5% level of significance. confidence interval is Would your answer remain the same if a 95% constricted to test the same hypothesis? Construct the interval and (5x3=15) justify your answer. (iv) ff 6. The amount of loan (L; in lakhs) that is sanetioned by a bank to an ‘applicant is regressed on Gender (Dummy for ‘Male; D_Male=1 if male, 0 otherwise), Credit Score (Ci a credit history), Income of (Inc, in lakh Rupees) and e Es applicant for a sample of 45 applicants” In L, = 4.999 ~ 0.0038D_Male; +0.043C, +:12062/nInc, +0.998Ed, higher values indicate ion ley in years) of the sequenceS’on the results, OF the Gauss Markov fd that income and eduéation have a high correlation uti of this test statistic? What are the null and Of this test? What can you conclude about the sgedasticity based on the above information given ild be the possi th P sible remedy of the problem if heteroscedasticity 1? Assume that error variances are unknown.40 countries for the year 2010 and obtained the following results using oLs. S + 0.0056 Divorce Rates 22,43 ~ 0.0287HDI + 532.45/nGDPper capita (0.0034) (019) (0.15) (05) Where S, is the number of suicides per million population in a country in the ing from 0 to 100 year 2019 HDI is the Human development index GDP perc Divorce Rates is number of divorces per million population in a country in the is Gross domestic product per capita (in $) ‘year 2019. () Why did not the NGO use only divorce ratelas an explanatory variable? What would be the properties of OLS estimhator of the coefficient of divorce rate in such a regression ? % Gi) Given GDP has an exact relation with HDI Where ‘WpI = (GDP per capita*Literacy Rates*Life Expectancy), ~ will perfect multi— collinearity be a problem in the’above regression? (ii) Interpret the coefficients of In GDP per-capita and Divorce rates. (iv) Suppose NGO only, eXamines the”impact of divorce rates on suicide rates and run the following regression: $/=*B\ + f2DivorceRates, + ¢). 343,45 In GDP per capita, Pree Ratess, (6x3=15) is abl it availal € on per unit cost (Y in Rs) of a manufacturing firm over a , and in i index of its output (X), Following results weredistrict's petficient of of thi What are a prior! expected sign of the What is the expenditure on ed coefficient in model 1? ‘An opposition party XYZ clai power, school drop-out rates increase. Is this a 0 and B,=0 7 1 this be greater than the RK value pa ns that wherever party ABC comes 10 id claim 7 Test the hypothesis H, By for Calculate R? for model #2, Wil ‘model #1 and why? Mi text for heteroscedasticity, the researcher conducted a Gilejser teSt for Feds tnd obtained the p value to be 4, What can you conclude (5 %3=15) about the absence of heteroscedasticity ? ‘Suppose demand for Brazilian coffee in Country Rigo is @ function of the real price of Brazilian coffee (P,,), real price of tea (P)) and real disposable income (¥,) in Rico. Suppose following results were obtained by running the implied regression, Coffee = 9.1 + 7.8 Pi, + 2.4P/4 0.00355 * researcher drops Pe and run the following regression = 9.3+2.6P, + 0.0036Y, (26) (4.0) Brazilian coffee in Rico is price inelastic? Why/Why ei (Sx3=15) formed a i # wee analysis to determine whether les (S)) ina country. The NGO used data for1 alse. Give reasons for ‘State whether the following statements are True or False. Give rea ‘Your answer. ; (Consider a simple regression model estimated using OLS. It is known that the Explained Sum of Squares is 75% higher than the Residual Sum of Squares, This implies that more than 75% of the total variation in the dependent variable is explained by the variation in the eXplinatory variable. In a simple regression model estimated, uSing O1 such that €=0 and e=0 . ha g » The OLS estimate of slope coefficient of regressing Y on{X is same as that of regressing X on Y. Ina linear regression In ¥/—f, +B,X/£8, , the meastire of goodness of fit R? was estimated as, 0170, The p-Yalue of the’ sldpe coefficient is 0.578. The coefficient is statistically”significanits$ince X explains 70% of Variation in Y, ithe residuals (¢,) are zach othér by the equation: Y = 2 + 0.5X, the (5x3=15) rmining the relation rict (% of class V students who drop and district's per capita income, district's jon ea a dummy yariable D_party ABC =1 if twas In’ power, = 0 otherwise. 215 districts were uded in this study. i Percapita ] District's expendi penditure | D_party | R? Income (X2) | _on education (X,) ABC (X,) ns 0.231 0.379 (14) 0.002 (00001)§ estimator of (b) Consider the following regression Y, = },X, +)4, where fix ix the OLS Bs 9 (i) Find the value of ji, Gi) Fina vip) (iii) Verify that fi is unbiased r ” ©) oue ” } JVI JIS A db dbl Q Q = »g9agv@ea@q QQ ¥©, = 6.275 +0.1147PR, ~0,0712LR, +0.0862SDP, Se= (3.125) (0.02713) (0.0.361) (0.03834) ne3s R? = 0.6876 Where C= Crimes per lakh of population PR = poverty rates LR = Literacy rate SDP = Sate Domestic Product A prior what signs are expected for the explanatory variables ? Explain your answers 2 A Gi) Test for overall goodness of fit of the regression (Use a = 5%) (iii) Another model was also used and following results were obtaii InC, = 2.142+0.01186In PR, —0.0548 In LR, + 0.092 Mh SDP, 1.102) (0.0673) (0.0259) =35 -R?=0,7923 ~ Interpret the coefficient of In SDP. (iv) The regression equation given in part (a) is mod 3.83-0,0089LR, ‘This equation was estimated using 50 croM@secti tion on states, by related to LR, separate regression were run for and the 17 states with the "highest LR. The sum of sqj states was 270. The sum of Squares residuals for the high (i) Compute unbi: subsamples. ce, for part (ii), suppose you belive that sent, and that the variance of the error term is »portional to state LR : var(t,)=Y / LR", where Y = an ‘xplain how you should transform the data to satisfy the ‘ 2x3=6) for sales of TV is as given below = 7.908 Price + 1.863 Advert (1.096) (0,683) 0 is price of TV measured in Rs, ue and Advert is advertising expenditure. Both sales and adver ‘of thousands of rupees. ae > coefficient of price statistically from 1 2 ig expenditure will being an er the increased advertising ive hypotheses Test at a = evenue that is sufficient to coy: ly state the result and alternatiFs, (ix) How would the model in part ii) be modified if the objet“ is to examine =. vaewther the marginal effect of experience is gender-specific? (How would ihe regression in part (i) be mosified if (qualitative varial ee ; interest with cach other dee ro) ‘Arandom sample of 200 vehicles travelling on rough roads with a posted speed rf Pratror3 mph on sueh ronds resulted in a sample mean speed of 37.5 mph and a le of 200 = ‘mph, whereas another random samp! ‘a sample mean and sample atest at 10% ‘sample standard deviation of 8.6 ‘\chicles with a posted speed limit of 55 mph resulted in “dtandard deviation of 35.8 mph and 9.2 mph, respectively, carry out significance level to decide whether the two population distribution varianees are ly data on country XYZ was collected for the period 2005 jon between foreign direct investment (FDD, trade 0 (GDP) and exchange rate (E). TO is defined a ratio ed Following regression was estimated FDI, =-0.58 + 0.012E, -0.025TO, +0. (0,013) (0.004) ({(0.015) (0. 145 coefifgrents Do you suspect some problem with the now ? Explain s consequences ? and why ? (use a = 5%) ion specified in (iii) above follows hi a igher order ¥ would you test for serial correlation? Give the steps ; jon specified in part (iii). What wi as ca lat will be the remedy for (2434344) ‘est if petty crimes (minor thefts) are higher in They obtain data on several es in the country Variables and ran thelowing ers the fol Ns nch. He considers # *: of various descriptions of the Tocation of that brane F regression (original) YY: =102,192~9075N, +0.354479, +1.2881, c= (2053) (0.0727) (0.543) 22, R?=0,579, RSS=384.27 fe restaurants nearby. P = the population nearby, Interpret the slope coefficients ofthe regression and Suppose we add another variable A to the regression a address of the restaurant, Consider the modified regs 8,125 8975N, +0.360P, +1.3011 A, (2082) (0.074) _(0.55 21) n=22, R*=0.695 theteof the equation? Why/Why not ? jem and what Do you suspect a problem in he problem an will you correct for the How do you conduct, ification erro, Stor 1 (1) is not measured correct the fies of the OLS estimators? (242434342) information, how would you test the Normality assumption je Null and Alternative hnypotheses. Do you think that the test is fon is run on 10 observations? (41) ion’ equation includes a quantitative dependent variable jwantitative independent variable (X = years of experience) and two 3 Gender and Education Level with two categories each; Male & e and not Graduate. Assume that the qualitative variables do not dummy variables, write the wage regression model if the ‘of experience, gender and education level is to be an: le Graduate as the reference category). Write th for Male Graduate category. Part (i) be changed if the Educational Level has three ly, Graduate, Post-Graduate & Ph.D, write the wage equation for the two specific Categories, (a) (b) Mae Post-Graduate. alyzed .