Coefficient of the explanatory variable, Microeconomics

Assignment Help:

Problem:

(a) Why is an error term added to a regression and explain its importance in the OLS procedure?

(b) Suppose we have a linear equation with a constant term, one explanatory variable and an error term, show in details the steps required, using the OLS procedure, to derive the estimates of the constant term and that of the coefficient of the explanatory variable.

(c) Suppose a researcher wants to test whether the returns on a company stock (y) show unit sensitivity to two factors (factor x2 and factor x3) among three considered. The regression is carried out on 144 monthly observations. The regression is: Yt = β1 + β2x2t + β3x3t + β4x4t+ ut

i) What are the restricted and unrestricted regressions?

ii)  If the two RSS are 502.4 and 302.8  respectively, perform an F-test of the restriction, showing all the required steps.

(d) How are the t-test and the F-test related and describe in which cases they cannot be applied?


Related Discussions:- Coefficient of the explanatory variable

Banking infrastructure, Banking Infrastructure: An efficient financial...

Banking Infrastructure: An efficient financial system can influence the long-term growth through three important channels, namely: 1) increase in the proportion of saving tran

Market Analysis, Is coca-cola an oligopoly or monopolistic competition

Is coca-cola an oligopoly or monopolistic competition

What is gini coefficient, Q. What is Gini Coefficient? Gini Coefficient...

Q. What is Gini Coefficient? Gini Coefficient: A statistical measure of inequality. A Gini score of 0 signifies perfect equality (in which each individual receives the same inc

Intermediate economics, what are the variables to be included in the social...

what are the variables to be included in the social welfare of a country?

Whata are the non-renewable resource, How does the approach of someone who ...

How does the approach of someone who has adopted the precautionary principle differ from someone with a blind faith in substitutability, when it comes to a non-renewable resource l

Describe positive and a negative externality, 1). Define and explain the co...

1). Define and explain the concept of an externality. Provide examples of both positive and a negative externality. 2). The Prisoner's Dilemma Exercise:

Utility and consumer surplus, Jeremy is an economics student who loves hamb...

Jeremy is an economics student who loves hamburgers. He could eat any number of them for dinner, but he gets a really bad stomach ache after eating a certain amount. In fact, his u

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd