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Assignment 2 For Accounting

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14 views2 pages

Assignment 2 For Accounting

Uploaded by

selamawitmul2013
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SALALE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS


DEPARTMENT OF ECONOMICS
GROUP ASSIGNMENT 2, INTRODUCTION ECONOMETRICS FOR FINANCE
DUE DATE IS
 Copying answers from other is strictly forbidden
 Maximum number member is 5
 Maximum marks: 15

Instruction: Answer the following questions accordingly


1. Consider the log of real GDP and log of nominal wage of a country (7 marks)

OLS Regression model: Dependent variable is log of wage


Variable Coefficient Std. Error t-Statistic Prob.
C -1.27404 0.062811 -0.28361 0.0000
LNGDP 0.745639 0.004957 150.4348 0.0000
R-squared 0.996565 Mean dependent var 8.112247
Adjusted R-squared 0.996521 S.D. dependent var 1.095522
S.E. of regression 0.064616 Akaike info criterion -.616032
Sum squared resid 0.325666 Schwarz criterion -.556482
Log likelihood 106.6413 F-statistic 22630.63
Durbin-Watson stat 0.301944 Prob(F-statistic) 0.00000

I. How do you interpret the coefficient of logGDP?


II. Is there autocorrelation problem? Why? Explain in detail
III. Are log of GDP and w integrated of order zero (I(0))?
ADF-test statistics
Variables I(0) I(1)
lngdp 0.528899 -4.83401
lnw 0.001598 -4.40925
Critical values
1% -3.5164 -3.5176
5% -2.8991 -2.8996
10% -2.5865 -2.5868
IV. Is the regression result spurious?
V. Are the variables cointegrated?
Variables I(0) I(1)
Lngdp 0.528899 -4.83401
Lnw 0.001598 -4.40925
Residual -2.92463
Critical values
1% -3.5164 -3.5176
5% -2.8991 -2.8996
10% -2.5865 -2.5868
2. From data for 54 standard metropolitan statistical areas (SMSA), Demaris estimated the following logit
model to explain high murder rate versus low murder rate(5 marks):
^i = 1.1387 + 0.0014 Pi + 0.0561C i − 0.4050 Ri
ln O
se = (0.0009) (0.0227) (0.1568)
where,
O = the odds of a high murder rate, P = 1980 population size inthousands, C = population growth rate
from 1970 to 1980, R = reading quotient, and these are the asymptotic standard errors.
a) How would you interpret the various coefficients?
b) Which of the coefficients are individually statistically significant?
c) What is the effect of a unit increase in the reading quotient on the odds of having a higher murder rate?
d) What is the effect of a percentage point increase in the populationGrowth rate on the odds of having a
higher murder rate?
3. Briefly explain the major assumptions of classical linear regression model. Also discuss biasedness,
efficiency and consistence of estimates. (1.5 marks)
4. Concisely discuss the classical linear regression model diagnostics focusing on causes, consequences,
and solutions for Heteroscedasticity, autocorrelation, multicollinearity, non-normality as well as model
specification error. (5 marks)
5. Write the similarities and difference between the following models
A. Linear probability model
B. Probit Model
C. Logit model
D. Propensity score matching

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