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Group Assignment For Econometrics

This document provides a group assignment for an Introduction to Econometrics class. It includes 10 questions covering various econometrics concepts like assumptions of linear regression, rank correlation coefficient, cointegration, reasons for disturbance terms, OLS estimation, coefficient of determination, price elasticity, and testing significance of regression coefficients. Students must complete the assignment in groups of maximum 4 members and submit their responses by June 4th, 2014. Plagiarism is not allowed and groups must include all member names.

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Amanuel Genet
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1K views

Group Assignment For Econometrics

This document provides a group assignment for an Introduction to Econometrics class. It includes 10 questions covering various econometrics concepts like assumptions of linear regression, rank correlation coefficient, cointegration, reasons for disturbance terms, OLS estimation, coefficient of determination, price elasticity, and testing significance of regression coefficients. Students must complete the assignment in groups of maximum 4 members and submit their responses by June 4th, 2014. Plagiarism is not allowed and groups must include all member names.

Uploaded by

Amanuel Genet
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Africa Beza College

Group Assignment for Introduction to Econometrics


Note: Deadline for submission 06/04/2014 E.C. (Weighted from 30%)
Maximum members in a group shouldn’t exceed 4 (Students)
 Cheating or any attempt to do so, causes automatic cancellation of your total group result and;
 Don’t forget to write group members Name, ID № and Section.

1. List and explain at least 5 assumptions of classical linear regression model with hypothetical
examples
2. A market researcher asks experts to express their preference for ten different brands of T-shirt. Their
replies are shown in the following table.

Brands of T-shirt A B C D E F G H I J
Customer A 10 4 2 8 1 9 6 3 5 7
Customer B 8 3 5 9 1 10 7 2 4 6
i) Calculate for the rank correlation coefficient and determine the type of association between the
preferences of the two sampled customers (r)?
ii) Interpret the result?
3. Briefly explain the concept of co-integration in time series data analysis?
4. The simplest form of economic relationships between two variables X and Y can be
represented by: Yi = 0 + 1Xi + Ui ; where 0 and 1 are regression parameters and U is
stochastic disturbance term. What are the reasons for the disturbance term (U) in the model?
5. The following data refers to the demand for money (M) and the rate of interest (R) in for eight
different economics:
M (In billions) 56 50 46 30 20 35 37 61
R% 6.3 4.6 5.1 7.3 8.9 5.3 6.7 3.5

A. Assuming a relationship
M=α +βR+U i , obtain the OLS estimators of α and β
B. Calculate the coefficient of determination for the data and interpret its value
C. If in a 9th economy the rate of interest is R=8.1, predict the demand for money(M) in this
economy.
6. The following results have been obtained from a simple of 11 observations on the values of sales (Y)
of a firm and the corresponding prices (X).
X̄ =519 .18
Ȳ =217 .82
∑ X 2i =3 , 134 , 543
∑ X i Y i=1 , 296 , 836
∑ Y 2i =539 , 512
i) Estimate the regression line of sale on price and interpret the results

1
Africa Beza College
Group Assignment for Introduction to Econometrics
ii) What is the part of the variation in sales which is not explained by the regression line?
iii) Estimate the price elasticity of sales.
7. The following table includes the GNP(X) and the demand for food (Y) for a country over ten years
period.
year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
Y 6 7 8 10 8 9 10 9 11 10
X 50 52 55 59 57 58 62 65 68 70
a. Estimate the food function
b. Compute the coefficient of determination and find the explained and unexplained variation in
the food expenditure.
c. Compute the standard error of the regression coefficients and conduct test of significance at
the 5% level of significance.

8. A sample of 20 observations corresponding to the regression model


Y i=α+βX i +U i gave the
following data.

∑ Y i =21. 9 ∑ ( Y i−Y )2 =86 . 9


∑ X i=186 . 2 ∑ ( X i −X )2 =215 . 4
∑ ( X i− X )( Y i −Y ) =106. 4
a. Estimate α and β
b. Calculate the variance of our estimates
c. Estimate the conditional mean of Y corresponding to a value of X fixed at X=10.
9. Suppose that a researcher estimates a consumptions function and obtains the following results:
C= 15 + 0 . 81 Yd n=19
2
(3 . 1) (18 . 7) R =0 .99

Where C=Consumption, Yd=disposable income, and numbers in the parenthesis are the ‘t-ratios’

a. Test the significant of Yd statistically using t-ratios


b. Determine the estimated standard deviations of the parameter estimates
10. Given the model:

Y i= β0 +β 1 X i +U i With usual OLS assumptions. Derive the expression for the error
variance.

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