COURSE TITLE ECONOMETRICF for FINANCE and MANAGMENT

PATR I. Write True if statement is correct and Write false if the statement is incorrect.
(1.5% point each)
1. Violations of the assumption of independence in linear regression can lead to biased
coefficient estimates.
2. Multicollinearity occurs when there is a strong linear relationship between two or
more independent variables, making it difficult to determine the individual effects of each
variable on the dependent variable.
3. Autocorrelation refers to the correlation between the current observation and the
previous observation(s) in a time series.
4. The presence of outlines and some important variables omitted from the model are not
necessarily in the causes of hetroscedacticity.
5. In multiple linear regression, the slope coefficient represents the change in the
dependent variable associated with a one-unit change in the corresponding independent
variable, holding all other variables constant.
6. If the residuals in a linear regression model follow a normal distribution, the assumption of
normality is satisfied.
PATR II. Match the following statements concerning their definition from column ‘’B’’ to
column ‘’A’’ (1.5% point each)
‘’A’’ ‘’ B’’
7. The category that we assign a value zero. A. Differential intercept coefficient
8. The category that we assign a value 1 B. The number of dummy
9. Is the test that measure the overall significances of C. Indicating absence or benchmark
the estimated regression
10. Is one less of the number of categories D. The Gold-Feld-Quandt test
11. The coefficient attempted to dummy variable E. F-test
12. Is the test used to detecting the problem of F. Durbin- Watson d-test
Heteroscedasticity
13. Is the test used to detecting the problem of G. Indicating the presence of that attribute
Autocorrelation
PATR III. Choose correct answer for each of the following questions from the given
choice. (1.5% point each)
14. What is the purpose of multiple linear regressions?
A. To predict the value of a dependent variable based on one independent variable
B. To predict the value of a dependent variable based on multiple independent variables
C. To analyze categorical data
D. To perform classification tasks
15. In the simple linear regression model, the regression slope
A) Represents the elasticity of Y on X.
B) Indicates by how many units Y increases, given a one unit increase in X.
C) Indicates by how many percent Y increases, given a one percent increase in X.
D) When multiplied with the explanatory variable will give you the predicted Y.
16. Under the least squares assumptions (zero conditional mean for the error term, X and Yi,
i
being X and u having finite fourth moments), the OLS estimator for the slope and intercept
i i
A) Is BLUE.
B) Has an exact normal distribution for n > 15.
C) Has a normal distribution even in small samples.
D) Is unbiased.
17. To decide whether or not the slope coefficient is large or small,
A) The slope coefficient must be statistically significant.
B) The slope coefficient must be larger than one.
C) You should change the scale of the V ariable if the coefficient appears to be too small.
D) You should analyze the economic importance of a given increase in X.
|X)=0
18. E(u say that
i i
A) The sample mean of the Xs is much larger than the sample mean of the errors.
B) Dividing the error by the explanatory variable results in a zero (on average).
C) The sample regression function residuals are unrelated to the explanatory variable.
D) The conditional distribution of the error given the explanatory variable has a zero mean.
19. The confidence interval for the sample regression function slope
A) Allows you to make statements about the economic importance of your estimate.
B) Can be used to compare the value of the slope relative to that of the intercept.
C) Adds and subtracts 1.96 from the slope.
D) Can be used to conduct a test about a hypothesized population regression function slope.
20. The t-statistic is calculated by dividing
A) The OLS estimator by its standard error.
B) The slope by 1.96.
C) The estimator minus its hypothesized value by the standard error of the estimator.
D) The slope by the standard deviation of the explanatory variable.
21. Multiplying the dependent variable by 100 and the explanatory variable by 100,000 leaves
the
A) Heteroskedasticity-robust standard errors of the OLS estimators the same.
2
A) Regression R the same
B) OLS estimate of the intercept the same.
C) OLS estimate of the slope the same.
22. Which of the following is an assumption of multiple linear regression?
A. Normal distribution of the dependent variable
B. No multicollinearity among the independent variables
C. Homoscedasticity of the residuals
D. All of the above
23. How is R-squared interpreted in multiple linear regressions?
A. It represents the percentage of variance in the dependent variable explained by
the independent variables.
B. It represents the percentage of variance in the independent variables explained
by the dependent variable.
C. .It measures the correlation between the dependent and independent variables.
D. .It represents the mean of the dependent variable.
24. What is the purpose of the adjusted R-squared in multiple linear regressions?
A. To measure the amount of variance explained by the independent variables
B. .To penalize model complexity and account for the number of predictors
C. .To determine the statistical significance of the regression coefficients
D. .To assess the linearity assumption of the model
25. What is the purpose of residual analysis in multiple linear regressions?
A. To check for violations of regression assumptions
B. .To assess the accuracy of predictions
C. .To identify influential data points D. All of the above
26. If the residuals in a linear regression model are not normally distributed, which assumption is
violated?
A. Linearity B. Normality C. Homoscedasticity D. Independence
27. Violations of the assumption of independence in linear regression can lead to:
A .Underestimation of standard errors B. Overestimation of standard errors
C. Biased coefficient estimates D. Inflated R-squared values
28. Heteroscedasticity in linear regression refers to:
A. Non-linear relationship between variables B. Non constant variance of residuals
C. Lack of independence among residuals D. Violation of the normality assumption
29. Which one is not the remedial measure of multicollinearity?
A. Obtaining more data C. Transformation of variables not important
B. . Drop variable D. Formalizes relationships among regressors.
30. The quantifying qualitative variables by constructing artificial variables which take on values
1 or 0 are ___________ variables.
A. Binary B. Dummy C. Qualitative D. categorical E. All
31. What is the advantage of panel data regression models over cross-sectional or time series
regressions?
A. They allow for better prediction accuracy C. They are less computationally intensive
B. They capture individual-level and time-specific effects D. They have fewer assumptions
32. Consider simple regression model with coefficient standard errors calculated using the
common formula. Which of the following statement is correct regarding the standard error
estimator for slope coefficient?
A. It varies positively with the spread of X about its mean value
B. It varies positively with the spread of X about zero
C. It varies positively with the sample size T
D. It varies positively with the square root of the residual variance E. None
33. E(ut) = 0 says that
A. Dividing the error by explanatory variable results in a zero
B. The sample mean Ys is much larger than zero
C. The condition the distribution of the error term has a zero mean
D. The sample mean Xs is equal to zero
34. One of the following statements is not correct
A. F-test and t-test in simple regression have the same result
B. You must accept the null hypothesis if the p-value related to F-test is higher than the set
significance level
C. F-test is used to assess whether there is significant relationship exists between
explanatory variables and a dependent one.
 D. All of the above
35. Which one is not consequences’ of multcollinearty?
A. The OLS estimators have large variances and covariance’s
B. The t-ratio statistically significant, R2 overall measure of goodness of fit can be very low
C. Even though the forecasting is still possible, the collinearitily remains the same within the
new sample observation.
D. The confidence interval to be much wider, leading to acceptance of the zero null
hypothesis
36. let model was regressed on annual percentage change in age rate(Yi) and unemployment
~ 1
rate(Xi) as follow: Y i = -1.43 + 8.72
Xi
se (2.07) (2.85)
r2 = 0.38 F1, 15 = 9.39,
So, which one true that if the unemployed rate goes to infinities or large and larger, then
annual percentage change in wage rate of an employment_________
A. Decreased by a rate of 1.43 C. Increased by a rate of 8.72
B. Decreased by a rate of 8.72 D. Increased by rate of 1.43
37. the model used in question numbers 29 above is called ______
A. Double Log model C. Reciprocal model
B. . Transformations of polynomials model D. Semi-log Model
PATR IV. Short answer (15%)
38. Write at least four dummy variables
39. Let α = 0.05 – level of significance , then the degree of confidence is ________
40. suppose we regressed child mortality(CM) on per capital GNP(PGNP) and the female
literacy rate ( FLR) for a sample of 64 countries, the regression results given as follow:
~i = 263.64 – 0.0056 PGNPi + a FLRi
CM
se (11.5932) (___b___) (0.2099)
t (___c__) (- 2.8187) (-10.6293)
~
p (0.00000*) (0.0065) (0.00000*) R2 0.7077 R 2 = 0.6981
Then, determine
i. coefficient of FLRi given by a=_____
ii. Standard error of the coefficient of PGNPi given by b =_______
iii. the t- calculated value of coefficient of constant given by c=_______
iv. interpret the result how variables PGNPi and FLRi are individual influence on
child mortality
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ANSWER SHEET
Name____________________________________ID.NO._____________ SECTION ______
True/false (9%) 1. 2. 3. 4. 5. 6.
Matching (11%) 7. 8. 9. 10. 11. 12. 13.

14. 15. 16. 17. 18. 19.

Choice (24%) 20. 21. 22. 23. 24. 25.
26. 27. 28. 29. 30. 31.
32. 33. 34. 35. 36. 37.
SHORT ANSWER (15%)
38.a._________________b._________________c.___________________d.________________
39._______________________
40. i. a________________ ii. b.________________ iii. C._________________
iv.___________________________________________________________________________
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