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    1. The null hypothesis that β1 = β2 = 0 would be rejected at the 5% level of significance based on the given ANOVA table. The p-value in this case would be less than 0.05. 2. For a regression model with an R^2 of 0.78 and n=80 observations, and 4 parameters, the overall significance of the model could be concluded at the 1% level of significance based on the F distribution and degrees of freedom. 3. Based on the two regression models provided, the incremental contribution of the wealth variable (X3i) would not be statistically significant at the 1% level, so the wealth variable would not be added to the model.

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    A comparative study about Chow Test

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    1. The null hypothesis that β1 = β2 = 0 would be rejected at the 5% level of significance based on the given ANOVA table. The p-value in this case would be less than 0.05. 2. For a regression model with an R^2 of 0.78 and n=80 observations, and 4 parameters, the overall significance of the model could be concluded at the 1% level of significance based on the F distribution and degrees of freedom. 3. Based on the two regression models provided, the incremental contribution of the wealth variable (X3i) would not be statistically significant at the 1% level, so the wealth variable would not be added to the model.

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    © All Rights Reserved
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    20 views2 pages

    A Comparative Study About Chow Test

    Uploaded by

    Crazy Soul
    1. The null hypothesis that β1 = β2 = 0 would be rejected at the 5% level of significance based on the given ANOVA table. The p-value in this case would be less than 0.05. 2. For a regression model with an R^2 of 0.78 and n=80 observations, and 4 parameters, the overall significance of the model could be concluded at the 1% level of significance based on the F distribution and degrees of freedom. 3. Based on the two regression models provided, the incremental contribution of the wealth variable (X3i) would not be statistically significant at the 1% level, so the wealth variable would not be added to the model.

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    of 2

    1.

    Given the following ANOVA table,

    Source of Variation SS df MSS


    Due to regression 257,362.4 2 128,681.2
    Due to Residuals 106,315.6 61 1742.88
    Total 363,678 63

    Whether the null hypothesis that 𝛽1 = 𝛽2 = 0 is accepted or rejected at 5% level of


    significance. What is the p value in this case?
    2. Illustrate the relationship between 𝑅 2 𝑎𝑛𝑑 𝐹. For a hypothetical regression problem, 𝑅 2 =
    0.78 and number of observations (n) = 80. If there are four (4) parameters (𝛽𝑠 ) in the
    model, how could you conclude the overall significancy of the model at 1% level of
    significance.
    3. Consider the following two regression results:

    Model -1:
    ̂ 𝒊 = 𝟒. 𝟒𝟓+. 𝟓𝟗𝟏 𝑿𝟐𝒊
    𝒀
    𝒔𝒆 = (. 𝟒𝟏𝟑𝟖) (𝟎. 𝟎𝟑𝟓𝟕)
    𝒕 = (𝟏𝟎. 𝟕𝟔) (𝟏𝟓. 𝟎𝟗𝟖𝟎)
    𝑹𝟐 = 𝟎. 𝟖𝟔𝟑𝟑, 𝒏 = 𝟏𝟓
    Model – 2:
    ̂ 𝒊 = 𝟒. 𝟕𝟕 + 𝟎. 𝟗𝟑𝟕 𝑿𝟐𝒊 − 𝟎. 𝟒𝟓𝟕𝑿𝟑𝒊
    𝒀
    𝒔𝒆 = (. 𝟖𝟔𝟐) (𝟎. 𝟕𝟔𝟓𝟐) (𝟎. 𝟖𝟔𝟗)
    𝒕 = (𝟓. 𝟓𝟑𝟑𝟔) (𝟏. 𝟐𝟐𝟒𝟓) (−𝟎. 𝟓𝟐𝟓𝟖)
    𝑹𝟐 = 𝟎. 𝟗𝟎𝟐𝟑, 𝒏 = 𝟏𝟓

    Here, 𝑌𝑖 = Consumption Expenditures, 𝑋2𝑖 = Income, 𝑋3𝑖 = Wealth.


    Is the incremental contribution of wealth variable statistically significant at 1% level of
    significance? How? Depending on your result, do you add the wealth variable (, 𝑋3𝑖 ) or
    not?

    4. Briefly explain the different steps of the Chow test to test the structural stability of
    regression model. What are the caveats about the Chow test?
    5. Illustrate the mechanism that was proposed by MacKinnon, White, and Davidson (MWD
    Test) to test the functional form of regression.
    6. Distinguish between 𝑅 2 𝑎𝑛𝑑 𝑅̅ 2 . Which 𝑅 2 should we use in practice? Why?
    7. Consider the following regression results:

    ̂ 𝒊 = 𝟏𝟗. 𝟏𝟔 + 𝟐. 𝟓𝟑 𝑿𝟐𝒊 + 𝟎. 𝟔𝟑 𝑿𝟑𝒊 − 𝟎. 𝟓𝟐 𝑿𝟒𝒊


    𝒀
    𝒔𝒆 = (𝟑. 𝟖𝟓) (𝟎. 𝟖𝟗) (𝟎. 𝟎𝟖) (𝟎. 𝟐𝟑)
    𝒕= (𝟒. 𝟗𝟕) (𝟐. 𝟖𝟒) (𝟕. 𝟖𝟖) (𝟐. 𝟐𝟔)
    𝟐
    𝑹 = 𝟎. 𝟖𝟕𝟓, 𝒏 = 𝟔𝟒
    𝑬𝑺𝑺 = 𝟐𝟒𝟔𝟑𝟖𝟓𝟒𝟎𝟓, 𝑹𝑺𝑺 = 𝟑𝟖𝟖𝟔𝟕𝟗𝟗𝟗𝟏
    Here, 𝑌𝑖 = Female Labor Force Participation Rate, 𝑋2𝑖 = Per Capita GDP, 𝑋3𝑖 =
    Female Literacy Rate, 𝑋4𝑖 = Fertility Rate.

    i. Interpret the partial regression coefficients (𝛽𝑠 ).


    ii. Interpret the significancy of the individual estimators.
    iii. Find the value of adjusted 𝑅 2 (𝑅̅ 2 ).
    iv. Construct the ANOVA table and test the overall significance of the model at
    5% level of significance.

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