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427 views9 pages

Introduction To Econometrics (3 Updated Edition, Global Edition)

Uploaded by

gfdsa123tryagg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Introduction

 to  Econometrics  
(3rd  Updated  Edition, Global Edition)  

by  

James  H.  Stock  and  Mark  W.  Watson  

Solutions to Odd-Numbered End-of-Chapter Exercises:


Chapter 5
(This version August 17, 2014)

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 1
_____________________________________________________________________________________________________

5.1 (a) The 95% confidence interval for β1 is [–4.93 ± 1.96 × 2.02], that is –8.889 ≤ β1 ≤ –0.9708.
(b) Calculate the t-statistic:
β̂1 − 0 −4.93
t= = = − 2.3702
SE ( β̂1 ) 2.08
The p-value for the test H0: β1 = 0 against the alternative β1 ≠ 0 is
p -value = 2Φ(− | t |) = 2Φ(−2.3707) = 2 × (0.0043) = 0.0086

The p-value is less than 0.01, so we can reject the null hypothesis at the 5% significance level,
and also at the 1% significance level.
(c) The t-statistic is
β̂1 − (−5.0) −0.07
t= = = −0.0347
SE ( β̂1 ) 2.02
The p-value for the test H0: β1 = –5.0 against the alternative β1 ≠ 5.0 is
p -value = 2Φ(− | t |) = 2Φ(−0.0347) = 2 × (0.486) = 0.972
The p-value is larger than 0.10, so we cannot reject the null hypothesis at the 10%, 5% or
1% significance level. Because β1 = –5.0 is not rejected at the 5% level, this value is
contained in the 95% confidence interval.
(d) The 90% confidence interval for β0 is [640.3 ± 1.65 × 23.5], that is 601.525 ≤ β0 ≤ 679.075.

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 2
_____________________________________________________________________________________________________

5.3. The 95% confidence interval is 2 × [4.16 ± 1.96 × 0.42], that is 6.67 ≤ Weight gain ≤ 9.97 lbs.

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 3
_____________________________________________________________________________________________________

5. 5 (a) The estimated gain from being in a small class is 13.9 points. This is equal to
approximately 1/5 of the standard deviation in test scores, a moderate increase.

(b) The t-statistic is t act = 13.9


2.5 = 5.56,
which has a p-value of 0.00. Thus the null
hypothesis is rejected at the 5% (and 1%) level.

(c) 13.9 ± 2.58 × 2.5 = 13.9 ± 6.45.

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 4
_____________________________________________________________________________________________________

5.7. (a) The t-statistic is 3.2


1.5 = 2.13 with a p-value of 0.03; since the p-value is less than
0.05, the null hypothesis is rejected at the 5% level.

(b) 3.2 ± 1.96 × 1.5 = 3.2 ± 2.94

(c) Yes. If Y and X are independent, then β1 = 0; but this null hypothesis was rejected
at the 5% level in part (a).

(d) β1 would be rejected at the 5% level in 5% of the samples; 95% of the


confidence intervals would contain the value β1 = 0.

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 5
_____________________________________________________________________________________________________

1
(Y1 + Y2 +!+ Yn )
5.9. (a) β = n
so that it is linear function of Y1, Y2, …, Yn.
X

(b) E(Yi|X1, …, Xn) = β1Xi, thus

1 1
E( β |X 1 ,…, X n ) = E (Y + Y +!+ Yn )|X 1 ,…, X n )
X n 1 2
1 1
= β ( X +!+ X n ) = β1
X n 1 1

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 6
_____________________________________________________________________________________________________

s
5.11. Using the results from 5.10, ˆ0  Ym and ˆ1  Yw  Ym . From Chapter 3, SE (Ym )  m and
nm
sm2 sw2
SE (Yw  Ym )   . Plugging in the numbers,
nm nw

=βˆ0 $565.89
= and SE(βˆ0 ) $7.65; βˆ1 =
−$63.52 and SE(βˆ1 ) =
$8.73.

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 7
_____________________________________________________________________________________________________

5.13. (a) Yes, this follows from the assumptions in KC 4.3.

(b) Yes, this follows from the assumptions in KC 4.3 and conditional
homoskedasticity

(c) They would be unchanged for the reasons specified in the answers to those
questions.

(d) (a) is unchanged; (b) is no longer true as the errors are not conditionally
homosckesdastic.

©2015 Pearson Education, Ltd.


Stock/Watson - Introduction to Econometrics - 3rd Updated Edition - Answers to Exercises: Chapter 5 8
_____________________________________________________________________________________________________

5.15. Because the samples are independent, βˆm ,1 and βˆw,1 are independent. Thus

var ( βˆm,1 − βˆw,1 ) = var ( βˆm,1 ) + var( βˆw,1 ). Var ( βˆm,1 ) is consistently estimated as

[ SE ( βˆm,1 )]2 and Var (βˆw,1 ) is consistently estimated as [ SE ( βˆw,1 )]2 , so that

var( βˆm,1 − βˆw,1 ) is consistently estimated by [ SE ( βˆm,1 )]2 + [ SE ( βˆw,1 )]2 , and the result
follows by noting the SE is the square root of the estimated variance.

©2015 Pearson Education, Ltd.

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