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Final Exam Term I - Version C

Dont make stupid mistakes! Read questions carefully, details are important! Dont even think about cheating! If you get caught, youll get zero and youll probably be expelled from the program! Good Luck! Questions are NOT ordered in function of difficulty

Theory (22 points)

Question 1: True, False and Explain. Explanation is only necessary for False.(1 point a question) 1) An efficient estimator is always unbiased

2) The MSE (Mean Square Error) combines bias and efficiency

3) The sampling distribution of that statistic is the probability distribution of the values it can take over all possible samples of the same number of observations from the population.

4) a t distribution is the ratio of 2 distribution divided by a standard normal distribution

5) n X i XY 0

6) we need the normality assumption to prove that OLS is BLUE

7) lnYi 1 2 X i u i is a linear regression model

8) Autocorrelation implies that the covariance of the residuals is zero

9) the slope coefficient in a regression of Y on X and a constant can be computed as the covariance between (X,Y) divided by the square of explicative variable.

10) The OLS method implies that the covariance between X and fitted Y is zero .

11)The R 2 of a regression is an indicator of how close the sample regression line is to the population regression line.

12) ceteris paribus, the variance of the disturbances decreases when you increase the number of observations.

Theoretical proofs
Question 1 (5 points) Explain the following proof of the unbiasedness of b 2 - That is, explain carefully why we can make each! of these steps) b2
n Y i YXiX n XiX 2


n Y i XiX n XiX 2


n XiX 1 2 Xiu i n XiX 2


n XiX 1 2 n XiXXi n XiXu i n XiX 2

b2 2

n XiXu i n XiX 2

Eb 2 E 2

n XiXu i n XiX 2

Eb 2 2

n XiXEu i n XiX 2

Eb 2 2

Question 2 (5 points) Derive the OLS estimators b 1 and b 2 . Explain carefully the different steps that you make.

Empirics (23 points)

Question 1(15 points, 1.5 each))
Regress Y (score on the econometrics exam (in points))on X (number of hours studied for the econometrics exam) and a constant (the intercept) (Y i 1 2 X i i Y X 1 4 3 4 4 8 8 8 give formula and compute b 1

give formula and compute b 2

give formula and compute se(b 1 )

give formula and compute se(b 2 )

give formula and compute R 2

interpret b 1

interprete b 2

What is the expected score of somebody who studied 75 hours .

Is the intercept coefficient statistically different from zero (at 5% significance level)

is the slope coefficient economically significant

Question 3 (6 points, 2 each)

1) A manufacturer claims that the life of its light bulbs is normally distributed with mean 36000 minutes and standard deviation 4000 minutes. For a random sample of 16 such light bulbs, the average life was found to be 34500 minutes. If the manufacturers claim is correct, what is probability of finding a sample mean that is equal or bigger than this.

2) When a production process is operating correctly, the resistance in ohms of components produced has a normal distribution with standard deviation 3. A random sample of 4 components was taken. what is the probability that the sample variance is smaller than 30.

Time spent working by students in the week before the final exams follows a normal distribution with standard deviation 4 hours. A random sample of 16 students was taken in order to estimate the mean study time for the population of all students.What is the probability that the sample mean is different from the population mean by more than 2 hours?(4 points)