Chapters 1 and 2

1 If a researcher uses daily data to examine a particular problem and creates a variable

a) Continuous

b) Cardinal

c) Ordinal

d) Nominal

2 The price of a house is best described as what type of number?

a) Discrete

b) Cardinal

c) Ordinal

d) Nominal

3 Which of the following is NOT a feature of continuously compounded returns (i.e. log-

a) They can be interpreted as continuously compounded changes in the prices

b) They can be added over time to give returns for longer time periods

c) They can be added across a portfolio of assets to give portfolio returns

d) They are usually fat-tailed

(i) The regressand

(ii) The regressor

(iii) The explained variable

(iv) The explanatory variable

a) (ii) and (iv) only

b) (i) and (iii) only

c) (i), (ii), and (iii) only

d) (i), (ii), (iii), and (iv)

5 Which of the following are alternative names for the independent variable (usually den

(i) The regressor

(ii) The regressand

(iii) The causal variable

(iv) The effect variable

a) (ii) and (iv) only

b) (i) and (iii) only

c) (i), (ii), and (iii) only

6 Which of the following statements is TRUE concerning the standard regression model?

a) y has a probability distribution

b) x has a probability distribution

c) The disturbance term is assumed to be correlated with x

d) For an adequate model, the residual (u-hat) will be zero for all sample data points

7 Which of the following statements is TRUE concerning OLS estimation?

a) OLS minimises the sum of the vertical distances from the points to the line

b) OLS minimises the sum of the squares of the vertical distances from the points to t

c) OLS minimises the sum of the horizontal distances from the points to the line

d) OLS minimises the sum of the squares of the horizontal distances from the points t

8 The residual from a standard regression model is defined as

a) The difference between the actual value, y, and the mean, y-bar

b) The difference between the fitted value, y-hat, and the mean, y-bar

c) The difference between the actual value, y, and the fitted value, y-hat
 d) The square of the difference between the fitted value, y-hat, and the mean, y-bar

9 Which one of the following statements best describes the algebraic representation of t

a)

b)

c)

d)

1 Which of the following statements concerning the regression population and sample

0 a) The population is the total collection of all items of interest

b) The population can be infinite

c) In theory, the sample could be larger than the population

d) A random sample is one where each individual item from the population is equal

1 Which of the following statements is true concerning the population regression func

1 a) The PRF is the estimated model

b) The PRF is used to infer likely values of the SRF

c) Whether the model is good can be determined by comparing the SRF and the P
 d) The PRF is a description of the process thought to be generating the data.

1 Which of the following models can be estimated using OLS, following suitable transf

2 i)

ii)

iii)

iv) .

a) (i) only

b) (i) and (iii) only

c) (i), (iii), and (iv) only

d) (i), (ii), (iii), and (iv)

1 Which of the following is an equivalent expression for saying that the explanatory v

3 a) The explanatory variable is partly random

b) The explanatory variable is fixed in repeated samples

c) The explanatory variable is correlated with the errors

d) The explanatory variable always has a value of one

4 a) On average, the estimated coefficient values will equal the true values

b) The OLS estimator is unbiased and no other unbiased estimator has a smaller v

c) The estimates will converge upon the true values as the sample size increases

d) The coefficient estimates will be as close to their true values as possible for sma

1 If an estimator is said to have minimum variance, which of the following statement

5 a) The probability that the estimate is a long way away from its true value is minimi

b) The estimator is efficient

c) Such an estimator would be termed "best"

d) Such an estimator will always be unbiased

1 Consider the OLS estimator for the standard error of the slope coefficient. Which of

6 (i) The standard error will be positively related to the residual variance

(ii) The standard error will be negatively related to the dispersion of the observation

(iii) The standard error will be negatively related to the sample size

(iv) The standard error gives a measure of the precision of the coefficient estimate.

a) (ii) and (iv) only

b) (i) and (iii) only

d) (i), (ii), (iii), and (iv)

1 Which of the following statements is INCORRECT concerning the classical hypothesi

7 a) If the null hypothesis is rejected, the alternative is accepted

b) The null hypothesis is the statement being tested while the alternative encompas

c) The test of significance and confidence interval approaches will always give the

d) Hypothesis tests are used to make inferences about the population parameters.

1 Suppose that a hypothesis test is conducted using a 5% significance level. Which of

8 (i) The significance level is equal to the size of the test

(ii) The significance level is equal to the power of the test

(iii) 2.5% of the total distribution will be in each tail rejection region for a 2-sided t

(iv) 5% of the total distribution will be in each tail rejection region for a 2-sided tes

a) (ii) and (iv) only

b) (i) and (iii) only

c) (i), (ii), and (iii) only

d) (i), (ii), (iii), and (iv)

9 a) H0 is rejected

b) H0 is not rejected

c) H1 is rejected

d) There is insufficient information given in the question to reach a conclusion

2 Which one of the following would be the most appropriate as a 95% (two-sided) co

0 a) (-4.79,2.19)

b) (-4.16,4.16)

c) (-1.98,1.98)

d) (-5.46,2.86)

2 Which one of the following is the most appropriate definition of a 99% confidence in

1 a) 99% of the time in repeated samples, the interval would contain the true value of

b) 99% of the time in repeated samples, the interval would contain the estimated va

c) 99% of the time in repeated samples, the null hypothesis will be rejected

d) 99% of the time in repeated samples, the null hypothesis will not be rejected whe
2 Which one of the following statements best describes a Type II error?

2 a) It is the probability of incorrectly rejecting the null hypothesis

b) It is equivalent to the power of the test

c) It is equivalent to the size of the test

d) It is the probability of failing to reject a null hypothesis that was wrong

2 Suppose that a test statistic has associated with it a p-value of 0.08. Which one of

3 (i) If the size of the test were exactly 8%, we would be indifferent between rejectin

(ii) The null would be rejected if a 10% size of test were used

(iii) The null would not be rejected if a 1% size of test were used

(iv) The null would be rejected if a 5% size of test were used.

a) (ii) and (iv) only

b) (i) and (iii) only

c) (i), (ii), and (iii) only

d) (i), (ii), (iii), and (iv)

2 Suppose that observations are available on the monthly bond prices of 100 compan

4 a) Cross-sectional

b) Time-series
c) Panel

d) Qualitative