Econometrics Study Guide and Individual Assignment

1. The following data is based on the consumption expenditure and incomes for 15
households at a particular month.
X=1922 Y=1823 XY=1,838,678
X2=2,541,333 Y2=1,789,940

i) Estimate the regression equation

ii) Construct a 95% confidence interval for the coefficients
iii) Test the significance of the coefficients at 5% level
iv) Comment on goodness of fit.
2. The quantity demanded of commodity is assumed to be a linear function of its price X. the
following results has been obtained from a sample of 10 observations.

Price in 15 13 12 12 9 7 7 4 6 3
Birr (x)
Quantity in 760 775 780 785 790 795 800 810 830 840
kg

Making use of the above information

i) Estimate the linear relationship and interpret the results.
ii) Estimate the standard errors of the regression coefficients.
iii) What percent of the variation in quantity demanded is explained by the regression
line?
iv) Test the significance of the regression coefficients.
v) Present the result of your analysis.

3. The following table shows the levels of output (Y), labour in put (X1) and capital input (X2)
of 12 firms measured in arbitrary units.
X2=110  X21 =980 YX1=40,834
X1=647 X12=34,843 YX2=6,7100
Y=757 Y2=48,143 X1X2=5,783
i) Estimate the output function Y=bo+b1X1+b2X2+U
ii) What is the economic meaning of the coefficients
 iii) Compute the standard errors of the coefficients
iv) Run tests of significance of the coefficients
v) Compute the coefficient of multiple determination and interpret it
vi) Conduct the overall significance test and interpret your result.
4. Based on the STATA output given below answer the subsequent questions.

A. Estimate the regression equation

B. Interprete coefficient of joint significance and coefficient of determnation
C. Test whether the regression coefficients are statistically significant or not based on
SE test, student T-test and confidence interval test and
D. Finally, interprete the regresion coefficients

5. Based on the following STATA output interpret the normality assumption test, model
specification and omitted variable test, homoskedasticity assumption test and no perfect
multicollinearity assumption test.
 A.
. swilk e

Shapiro-Wilk W test for normal data

Variable Obs W V z Prob>z

e 395 0.94569 14.785 6.406 0.00000

B.

. linktest

Source SS df MS Number of obs = 395

F(2, 392) = 1064.86
Model 6740702.39 2 3370351.19 Prob > F = 0.0000
Residual 1240707.4 392 3165.0699 R-squared = 0.8446
Adj R-squared = 0.8438
Total 7981409.79 394 20257.3852 Root MSE = 56.259

api00 Coef. Std. Err. t P>|t| [95% Conf. Interval]

_hat 1.002677 .2535761 3.95 0.000 .5041374 1.501216

_hatsq -2.02e-06 .0001911 -0.01 0.992 -.0003777 .0003737
_cons -.8498226 81.48438 -0.01 0.992 -161.0509 159.3513

. ovtest

Ramsey RESET test using powers of the fitted values of api00

Ho: model has no omitted variables
F(3, 382) = 0.88
Prob > F = 0.4512

C.
. hettest

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of api00

chi2(1) = 4.76
Prob > chi2 = 0.0292
 D.
. vif

Variable VIF 1/VIF

full 6.14 0.162891

emer 6.12 0.163436
meals 3.61 0.277063
ell 3.32 0.300898
yr_rnd 1.88 0.532721
enroll 1.77 0.565546
mobility 1.31 0.762790
acs_k3 1.17 0.853987
acs_46 1.15 0.865928

Mean VIF 2.94