What is the prediction error in this forecast

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Reference no: EM132368435

Econometrics Problems -

Problem One (to be done before the lab session) Do Problem on page 158 of the textbook "Principles of Econometrics". Exclude (d).

The general manager of an engineering firm wants to know whether a technical artist's experience influences the quality of his or her work. A random sample of 50 artists is selected and their years of work experience and quality rating (as assessed by their supervisors) recorded. Work experience (EXPER) is measured in years and quality rasing (RATING) takes a value in the interval one to four, with 4 = very good and 1 = very poor. Two models are estimated by least squares. The estimates and standard errors are

(a) For each model, sketch the estimated regression function for EXPER = 10 to 40 years.

(b) Using each model, predict the rating of a worker with 10 years experience.

(c) Using each model, find the marginal effect of another year of experience on the expected worker rating for a worker with 10 years' experience.

(d) Using each model, construct a 95% interval estimate for the marginal effect found in (c). Note that Model 2 has one fewer observations due to 1 worker having EXPER = 0.

Problem Two (to be done during the lab session)

Download the files fair4.wfl and fair4.def and Do Exercise on page 160 of the textbook "Principles of Econometrics".

Reconsider the presidential voting data (fair4.dat).

(a) Using the data from 1916 to 2008, estimate the regression model VOTE = β₁ + β₂GROWTH + e. Based on these estimates, what is the predicted value of VOTE in 2008? What is the least squares residual for the 2008 election observation?

(b) Estimate the regression in (a) using the data from 1916-2004. Predict the value of VOTE in 2008 using the actual value of GROWTH for 2008, which was 0.22%. What is the prediction error in this forecast? Is it larger or smaller than the error computed in part (a)?

(c) Using the regression results from (b), construct a 95% prediction interval for the 2008 value of VOTE using the actual value of GROWTH = 0.22%. Is the actual 2008 outcome within the prediction interval?

(d) Using the estimation results in (b), what value of GROWTH would have led to a prediction that the incumbent party (Republicans] would have won 50.1% of the vote?

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Reference no: EM132368435

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