NATIONAL ECONOMICS UNIVERSITY ECONOMETRICS MIDTERM TEST

SCHOOL OF BANKING & FINANCE Duration: 75 minutes

Program Bachelor Financial Investment

Class:__________________________ Name:__________________________
StudentID:______________________ Signature: ______________________

Instructions (read before starting):

 Materials to be supplied: textbook, slide or handout. No cellphone
 Approved calculators are permitted.
 Whenever conducting a test, use a 5% significance level unless stated
otherwise. State null and alternative hypotheses, null distribution (including degrees
of freedom), rejection criterion (critical values and rejection region) and outcome.
 Use a two-sided alternative hypothesis for tests, unless stated otherwise.
 All models have constant term.
 Avoid the temptation to look into the work of the person next to you.

PART I MULTIPLE – CHOICE [30 POINTS]

(Each question carries 3 pts. There is exactly one correct answer for each
question. Circle your answer)
2β
1. EVIEWS‘s command to regress the equation: ln ( Y ) =β 0+ β 1 X 1 + X +u is
2

A. LS LOG(Y) C X1 X2^-1 B. LS Y C X1 1/X2

C. LS LOG(Y) C X1 X2 D. Both A and B
2. In the equation Y = β0 + β 1 X +u, β 0 is the ......, β 1 is the ......
A. Error term, slope B. Intercept, slope
C. Error term, intercept D. Slope, intercept
3. If the total sum of squared (SST) in a regression is 81, and the sum of squared
residuals (SSR) is 25, what is R-squared?
A. 0.69 B. 0.10
C. 0.31 D. 0.48
4. The OLS method estimates the regression coefficients by
A. Minimizing the sum of squared root B. Minimizing the sum of squared residuals
of residuals
C. Minimizing the sum of squared D. Both B and C
differences between predicted values
 and observed values
5. If R2ur =0.5, R2r =0.43, number of restrictions ¿ 3, and n−k =41, what is the
CORRECT statement?:
A. Reject H 0, model (UR ) is better B. Accept H 0, model (UR ) is better
C. Reject H 0, model (R) is better D. Accept H 0, model (R) is better
6. You should reject the null hypothesis H 0 : β 1=0 against H 1 : β1 ≠ 0 if
A. |t−stat|>¿ critical value B. t−stat >¿critical value
C. Either t−stat >¿ critical value or D. Both A and C
t−stat <¿- critical value
7. In a regression with 2 explanatory variables and 25 observations, the estimator
of the first slope and its standard error are 1.56 and 0.23, respectively. The
95% confidence interval of this coefficient is:
A. (1.08 , 2.04) B. (1.11, 2.01)
C. (1.11, 2.04) D. (1.08 , 2.01)
8. The conditional expectation function of a production function:
E(lnQ∨lnK ,lnL )=β 0+ β1 lnK + β 2 lnL where Q , K and L are firms’s output, capital
and the number of labors. What is the CORRECT pair of hypotheses to test
constant returns to scale:

{0
H 0 : β 1 + β 2=0
A. H : β + β ≠ 0
1 2
{0
H 0 : β 1 + β 2=1
B. H : β + β ≠1
1 2

C. { D. {
H 0 : β 1 + β 2=0 H 0 : β 1 + β 2=1
H 0 : β1 + β 2 >0 H 0 : β1 + β 2 >1
9. OLS report with EVIEWS
Dependent Variable: PRICE
Included observations: 321

Variable Coefficient Std. Error

C -4150.709 6033.702
AREA 25.56505 3.337757
BATHS 19829.66 3010.410

R-squared 0.486523 Mean dependent var96100.66

Adjusted R-squared 0.483294 S.D. dependent var 43223.73

How many coefficients are statistically significant at significance level of 5%?

A. 0 B. 1
C. 2 D. 3
10.Assumtion Zero conditional mean is satisfied, OLS estimators are?
A. Unbiased estimators B. Consistent estimators
C. Best estimators D. Biased estimators

PART II TRUE – FALSE? [30 POINTS]

(Are the following statements true or false? Explain your answer in a maximum
of one or two sentences. Each question carries 5 marks. )

{ H : β =0
a) In a linear regression, the conclusion of one tail test H0 : β j >0 is always the
0 j

{ H 0 : β j=0
same with two tails test H : β ≠ 0 .
0 j

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b) In a test of multiple linear restrictions, the larger the number of restrictions is,
the bigger value F test is.
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c) If Assumption Homoskedasticity is violated, but all other assumptions are
satisfied, the OLS estimators are still unbiased.
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^
d) The estimated results of a production function: ln ( Q ) =1.37+0.63 ln ( K ) +0.45 ln(L)
. When K=L=1, so predicted value of Q on this regression is 1.37.
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e) In single linear regression, the sign of the slope is always equal to the sign of
the sample correlation coefficient of x and y .
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f) When testing H 0 : β j=0 against H 1 : β j ≠ 0 , a t−statistic is always positive.
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PART III CASE ANALYSIS [40 POINTS]

Consider the regression model:
fscore=β 0 + β 1 skipped+ β 2 extra+ β 3 female+u
where fscore is score of the final exam (in 4 – point scale), skipped is the number of
skipped lectures, extra is the number of studying hours at home/library and female is a
dummy variable equal to 1 if the individual is female student and 0 otherwise.
The following results have been obtained by ordinary least squares regression
(standard errors in parentheses):
^
fscore=0.71−0.35 skipped +0.19 extra−0.03 female
( 0.6 )( 0.14 ) ( 0.64 ) ( 0.02 )
2
n=315 , R =0.64
a) (8 pts) Provide an interpretation for the R−squared from this regression.
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b) (8 pts) Is β 3 statistically significant at the 5% level? Conduct the appropriate
test.
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c) (8 pts) Interpret the estimated coefficient on extra . Is β 2 statistically significant
at the 5% level? Conduct the appropriate test. Then compute the 95%
confidence interval for this coefficient.
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d) (8 pts) Re-run the above regression, caught the new R2=0.43, after eliminating
female and extra . What does this result indicate?
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e) (8 pts) The 95% confidence interval of β skippied .
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