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Chapter 7
Hypothesis Tests and Confidence Intervals in Multiple Regression
Multiple Choice
1) The confidence interval for a single coefficient in a multiple regression
a. makes little sense because the population parameter is unknown.

b. should not be computed because there are other coefficients present in the model.
c. contains information from a large number of hypothesis tests.
d. should only be calculated if the regression R2 is identical to the adjusted R2.
Answer: c
2) The following linear hypothesis can be tested using the F-test with the exception of
a. β 2 = 1 and β 3 = β 4 / β 5 .
b. β2 = 0 .
c. β1 + β 2 = 1 and β 3 = −2 β 4 .
d. β0 = β1 and β1 = 0.
Answer: a
3) The formula for the standard error of the regression coefficient, when moving from one
explanatory variable to two explanatory variables,
a. stays the same.

b. changes, unless the second explanatory variable is a binary variable.
c. changes.
d. changes, unless you test for a null hypothesis that the addition regression
coefficient is zero.
Answer: c
1
4) All of the following are examples of joint hypotheses on multiple regression coefficients,
with the exception of
a. H 0 : β1 + β 2 = 1 .
β3
b. H 0 : = β1 and β 4 = 0 .
β2
c. H 0 : β 2 = 0 and β 3 = 0 .
d. H 0 : β1 = − β 2 and β1 + β 2 = 1 .
Answer: a
5) When testing joint hypothesis, you should
a. use t-statistics for each hypothesis and reject the null hypothesis is all of the
restrictions fail.
b. use the F-statistic and reject all the hypothesis if the statistic exceeds the critical
value.
c. use t-statistics for each hypothesis and reject the null hypothesis once the statistic
exceeds the critical value for a single hypothesis.
d. use the F-statistics and reject at least one of the hypothesis if the statistic exceeds
the critical value.
Answer: d
6) The overall regression F-statistic tests the null hypothesis that
a. all slope coefficients are zero.

b. all slope coefficients and the intercept are zero.
c. the intercept in the regression and at least one, but not all, of the slope coefficients
is zero.
d. the slope coefficient of the variable of interest is zero, but that the other slope
coefficients are not.
Answer: a
7) For a single restriction (q = 1), the F-statistic
a. is the square root of the t-statistic.

b. has a critical value of 1.96.
c. will be negative.
d. is the square of the t-statistic.
Answer: d
2
8) The homoskedasticity-only F-statistic is given by the following formula
( SSRrestricted − SSRunrestricted ) / q
a. F = .
SSRunrestricted /(n − kunrestricted − 1)
b. F = .
SSRrestricted /(n − krestricted − 1)
( SSRunrestricted − SSRrestricted ) / q
c. F = .
( SSRrestricted − SSRunrestricted ) /(q − 1)
d. F = .
SSRunrestricted /(n − kunrestricted )
Answer: a
9) All of the following are correct formulae for the homoskedasticity-only F-statistic, with
the exception of
a. F = .
( SSRunrestricted − SSRrestricted ) / q
b. F = .
SSRrestricted /(n − krestricted − 1)
( SSRrestricted − SSRunrestricted ) n − kunrestricted − 1
c. F = × .
SSRunrestricted q
⎛ SSRrestricted ⎞ (n − kunrestricted − 1)
d. F = ⎜ − 1⎟ × .
⎝ SSRunrestricted ⎠ q
Answer: b
10) In the multiple regression model, the t-statistic for testing that the slope is significantly
different from zero is calculated
a. by dividing the estimate by its standard error.

b. from the square root of the F-statistic.
c. by multiplying the p-value by 1.96.
d. using the adjusted R2 and the confidence interval.
Answer: a
3
11) To test joint linear hypotheses in the multiple regression model, you need to
a. compare the sums of squared residuals from the restricted and unrestricted model.
b. use the heteroskedasticity-robust F-statistic.
c. use several t-statistics and perform tests using the standard normal distribution.
d. compare the adjusted R2 for the model which imposes the restrictions, and the
unrestricted model.
Answer: b
12) The homoskedasticity-only F-statistic is given by the following formula
2
( Runrestricted − Rrestricted
2
/q
a. F = .
1 − ( Runrestricted ) /(n − kunrestricted − 1)
2
1 − Runrestricted
2
/q
b. F = .
Runrestricted /(n − kunrestricted − 1)
2
2
( Runrestricted − Runrestricted
2
/q
c. F = .
1 − ( Runrestricted ) /(n − krestricted − 1)
2
2
( Rrestricted − Runrestricted
2
/q
d. F = .
1 − ( Rrestricted ) /(n − krestricted − 1)
2
Answer: a
2 2
13) Let Runrestricted and Rrestricted be 0.4366 and 0.4149 respectively. The difference between the
unrestricted and the restricted model is that you have imposed two restrictions. There are
420 observations. The F-statistic in this case is
a. 4.61.
b. 8.01.
c. 10.34.
d. 7.71.
Answer: b
4
14) If you wanted to test, using a 5% significance level, whether or not a specific slope
coefficient is equal to one, then you should
a. subtract 1 from the estimated coefficient, divide the difference by the standard
error, and check if the resulting ratio is larger than 1.96.
b. add and subtract 1.96 from the slope and check if that interval includes 1.
c. see if the slope coefficient is between 0.95 and 1.05.
d. check if the adjusted R2 is close to 1.
Answer: a
15) If the absolute value of your calculated t-statistic exceeds the critical value from the
standard normal distribution you can
a. safely assume that your regression results are significant.

b. reject the null hypothesis.
c. reject the assumption that the error terms are homoskedastic.
d. conclude that most of the actual values are very close to the regression line.
Answer: b
16) If you reject a joint null hypothesis using the F-test in a multiple hypothesis setting, then
a. a series of t-tests may or may not give you the same conclusion.
b. the regression is always significant.
c. all of the hypotheses are always simultaneously rejected.
d. the F-statistic must be negative.
Answer: a
17) When your multiple regression function includes a single omitted variable regressor, then
a. use a two-sided alternative hypothesis to check the influence of all included

variables.
b. the estimator for your included regressors will be biased if at least one of the
included variables is correlated with the omitted variable.
c. the estimator for your included regressors will always be biased.
d. lower the critical value to 1.645 from 1.96 in a two-sided alternative hypothesis to
test the significance of the coefficients of the included variables.
Answer: b
5
18) A 95% confidence set for two or more coefficients is a set that contains
a. the sample values of these coefficients in 95% of randomly drawn samples.

b. integer values only.
c. the same values as the 95% confidence intervals constructed for the coefficients.
d. the population values of these coefficients in 95% of randomly drawn samples.
Answer: d
19) When there are two coefficients, the resulting confidence sets are
a. rectangles.
b. ellipses.
c. squares.
d. trapezoids.
Answer: b
20) When testing the null hypothesis that two regression slopes are zero simultaneously, then
you cannot reject the null hypothesis at the 5% level, if the ellipse contains the point
a. (-1.96, 1.96).
b. |(0, 1.96)|.
c. (0,0).
d. (1.962, 1.962).
Answer: c
21) The OLS estimators of the coefficients in multiple regression will have omitted variable
bias
a. only if an omitted determinant of Yi is a continuous variable.

b. if an omitted variable is correlated with at least one of the regressors, even though
it is not a determinant of the dependent variable.
c. only if the omitted variable is not normally distributed.
d. if an omitted determinant of Yi is correlated with at least one of the regressors.
Answer: d
6
22) At a mathematical level, if the two conditions for omitted variable bias are satisfied, then
a. E (ui | X 1i , X 2i ,..., X ki ) ≠ 0 .
b. there is perfect multicollinearity.
c. large outliers are likely: X 1i , X 2i ,..., X ki and Yi have infinite fourth moments.
d. ( X 1i , X 2i ,..., X ki , Yi ), i = 1,..., n are not i.i.d. draws from their joint distribution.
Answer: a
23) All of the following are true, with the exception of one condition:
2
a. a high R 2 or R does not mean that the regressors are a true cause of the
dependent variable.
2
b. a high R 2 or R does not mean that there is no omitted variable bias.
2
c. a high R 2 or R always means that an added variable is statistically significant.
2
d. a high R 2 or R does not necessarily mean that you have the most appropriate set
of regressors.
Answer: c
24) The general answer to the question of choosing the scale of the variables is
a. dependent on you whim.

b. to make the regression results easy to read and to interpret.
c. to ensure that the regression coefficients always lie between -1 and 1.
d. irrelevant because regardless of the scale of the variable, the regression coefficient
is unaffected.
Answer: b
25) If the estimates of the coefficients of interest change substantially across specifications,
a. then this can be expected from sample variation.

b. then you should change the scale of the variables to make the changes appear to
be smaller.
c. then this often provides evidence that the original specification had omitted
variable bias.
d. then choose the specification for which your coefficient of interest is most
significant.
Answer: c
7
Essays and Longer Questions
1) The F-statistic with q = 2 restrictions when testing for the restrictions β1 = 0 and
β 2 = 0 is given by the following formula:
⎛ 2 2 l tt ⎞
1 ⎜ t1 + t2 − 2 ρ t1 ,t2 1 ⎟
F=
2⎜ 1− ρl 2
⎟
⎝ t1 ,t2 ⎠
Discuss how this formula can be understood intuitively.
Answer: For the case when there is no correlation between the two explanatory variables,
the formula reduces to a simple average of the squared t-statistics, i.e.,
1
F = ( t12 + t22 ) . The F2,∞ distribution is the distribution of a random variable
2
with a chi-squared distribution with 2 degrees of freedom, divided by 2.
Equivalently, the F2,∞ distribution is the distribution of the average of 2 squared
standard normal random variables. Because the t-statistics are uncorrelated by
assumption, they are independent standard normal random variables under the
null hypothesis. If either β1 or β 2 are nonzero (or both), then either t12 or t22 or
both will be large. This leads to a large F-statistic, and hence a rejection of the
null hypothesis.
2) The cost of attending your college has once again gone up. Although you have been told
that education is investment in human capital, which carries a return of roughly 10% a
year, you (and your parents) are not pleased. One of the administrators at your
university/college does not make the situation better by telling you that you pay more
because the reputation of your institution is better than that of others. To investigate this
hypothesis, you collect data randomly for 100 national universities and liberal arts
colleges from the 2000-2001 U.S. News and World Report annual rankings. Next you
perform the following regression
n = 7,311.17 + 3,985.20 × Reputation – 0.20 × Size

Cost
(2,058.63) (664.58) (0.13)
+ 8,406.79 × Dpriv – 416.38 × Dlibart – 2,376.51 × Dreligion

(2,154.85) (1,121.92) (1,007.86)
R2=0.72, SER = 3,773.35
8
where Cost is Tuition, Fees, Room and Board in dollars, Reputation is the index used in
U.S. News and World Report (based on a survey of university presidents and chief
academic officers), which ranges from 1 (“marginal”) to 5 (“distinguished”), Size is the
number of undergraduate students, and Dpriv, Dlibart, and Dreligion are binary variables
indicating whether the institution is private, a liberal arts college, and has a religious
affiliation. The numbers in parentheses are heteroskedasticity-robust standard errors.
(a) Indicate whether or not the coefficients are significantly different from zero.
Answer: The coefficient on liberal arts colleges, is not significantly different from zero.
All other coefficients are statistically significant at conventional levels, with the
exception of the size coefficient, which carries a t-statistic of 1.54, and hence is
not statistically significant at the 5% level (using a one-sided alternative
hypothesis).
(b) What is the p-value for the null hypothesis that the coefficient on Size is equal to zero?
Based on this, should you eliminate the variable from the regression? Why or why not?
Answer: Using a one-sided alternative hypothesis, the p-value is 6.2 percent. Variables
should not be eliminated simply on grounds of a statistical test. The sign of the
coefficient is as expected, and its magnitude makes it important. It is best to
leave the variable in the regression and let the reader decide whether or not this
is convincing evidence that the size of the university matters.
(c) You want to test simultaneously the hypotheses that β size = 0 and β Dlibart = 0 . Your
regression package returns the F-statistic of 1.23. Can you reject the null hypothesis?
Answer: The critical value for F2,∞ is 3.00 (5% level) and 4.61 (1% level). Hence you
cannot reject the null hypothesis in this case.
(d) Eliminating the Size and Dlibart variables from your regression, the estimation regression
becomes
n = 5,450.35 + 3,538.84 × Reputation + 10,935.70 × Dpriv – 2,783.31 × Dreligion;

Cost
(1,772.35) (590.49) (875.51) (1,180.57)
R2=0.72, SER = 3,792.68
Why do you think that the effect of attending a private institution has increased now?
Answer: Private institutions are smaller, on average, and some of these are liberal arts
colleges. Both of these variables had negative coefficients.
9
(e) You give a final attempt to bring the effect of Size back into the equation by forcing the
assumption of homoskedasticity onto your estimation. The results are as follows:
n = 7,311.17 + 3,985.20 × Reputation – 0.20 × Size

Cost
(1,985.17) (593.65) (0.07)
+ 8,406.79 × Dpriv – 416.38 × Dlibart – 2,376.51 × Dreligion

(1,423.59) (1,096.49) (989.23)
R2=0.72, SER = 3,682.02
Calculate the t-statistic on the Size coefficient and perform the hypothesis test that its
coefficient is zero. Is this test reliable? Explain.
Answer: Although the coefficient would be statistically significant in this case, the test is
unreliable and should not be used for statistical inference. There is no
theoretical suggestion here that the errors might be homoskedastic. Since the
standard errors are quite different here, you should use the more reliable ones,
i.e., the heteroskedasticity-robust.
3) In the multiple regression model with two explanatory variables
Yi = β 0 + β 1 X 1i + β 2 X 2i + u i
the OLS estimators for the three parameters are as follows (small letters refer to
deviations from means as in zi = Z i − Z ):
βˆ = Y − βˆ X − βˆ X
0 1 1 2 2
n n n n
∑ y x ∑x −∑ y x ∑x
i 1i
2
2i i 2i x
1i 2 i
βˆ1 = i =1
n
i =1
n
i =1
n
i =1
∑ x12i ∑ x22i − (∑ x1i x2i )2

i =1 i =1 i =1
n n n n
∑ yi x2i ∑ x12i − ∑ yi x1i ∑ x1i x2i

βˆ2 = i =1
n
i =1
n
i =1
n
i =1
∑x ∑x
i =1
2
1i
i =1
2
2i − (∑ x1i x2i ) 2
i =1
You have collected data for 104 countries of the world from the Penn World Tables and
want to estimate the effect of the population growth rate (X1i) and the saving rate (X2i)
(average investment share of GDP from 1980 to 1990) on GDP per worker (relative to
10
the U.S.) in 1990. The various sums needed to calculate the OLS estimates are given
below:
n n n
∑ Yi = 33.33; ∑ X1i = 2.025; ∑ X 2i = 17.313

i =1 i =1 i =1
n n n
∑y
i =1
2
i = 8.3103; ∑ x12i = .0122; ∑ x22i = 0.6422
i =1 i =1
n n n
∑yx
i =1
i 1i = −0.2304; ∑ yi x2i = 1.5676; ∑ x1i x2i = −0.0520
i =1 i =1
The heteroskedasticity-robust standard errors of the two slope coefficients are 1.99 (for
population growth) and 0.23 (for the saving rate). Calculate the 95% confidence interval
for both coefficients. How many standard deviations are the coefficients away from zero?
Answer: The 95% confidence interval for the population growth is (–16.85, -9.05), and
the 95% confidence interval for the saving rate is (0.94, 1.84). The population
growth coefficient has a t-statistic of -6.51, and the saving rate coefficient of
6.04. These represent standard deviations away from zero.
4) A subsample from the Current Population Survey is taken, on weekly earnings of

individuals, their age, and their gender. You have read in the news that women make 70
cents to the $1 that men earn. To test this hypothesis, you first regress earnings on a
constant and a binary variable, which takes on a value of 1 for females and is 0 otherwise.
The results were:
n = 570.70 - 170.72 × Female, R2=0.084, SER = 282.12.

Earn
(9.44) (13.52)
(a) Perform a difference in means test and indicate whether or not the difference in the mean
salaries is significantly different. Justify your choice of a one-sided or two-sided
alternative test. Are these results evidence enough to argue that there is discrimination
against females? Why or why not? Is it likely that the errors are normally distributed in
this case? If not, does that present a problem to your test?
Answer: The t-statistic is -12.63, while the critical value is –1.64. The difference is
therefore statistically significant. A one-sided alternative was chosen since the
claim is that females make less than males. This represents little evidence of
discrimination, since attributes of males and females have not been included.
Given that earnings distributions are not normally distributed, the errors will
also not be distributed normally, and assuming that they are, results in
problematic inference.
11
(b) Test for the significance of the age and gender coefficients. Why do you think that age
plays a role in earnings determination?
Answer: The t-statistics are 9.36 for the age coefficient, and -13.00 for the gender
coefficient. Both of these values are greater than the (absolute) critical value
from the standard normal distribution (1.64). Hence you can reject the null
hypothesis that these coefficients are zero. Age proxies “on the job training.” A
better proxy that has been used frequently in the past is the Mincer experience
variable (Age-Education-6). Obviously this is a better proxy for some
subsample of individuals than for others.
5) You have collected data from Major League Baseball (MLB) to find the determinants of
winning. You have a general idea that both good pitching and strong hitting are needed to do
well. However, you do not know how much each of these contributes separately. To
investigate this problem, you collect data for all MLB during 1999 season. Your strategy is to
first regress the winning percentage on pitching quality (“Team ERA”), second to regress the
same variable on some measure of hitting (“OPS – On-base Plus Slugging percentage”), and
third to regress the winning percentage on both.
Summary of the Distribution of Winning Percentage, On Base plus

Slugging percentage, and Team Earned Run Average for MLB in 1999
Average Standard Percentile

deviation
10% 25% 40% 50% 60% 75% 90%
(median)
Team 4.71 0.53 3.84 4.35 4.72 4.78 4.91 5.06 5.25
ERA
OPS 0.778 0.034 0.720 0.754 0.769 0.780 0.790 0.798 0.820
Winning 0.50 0.08 0.40 0.43 0.46 0.48 0.49 0.59 0.60
Percentage
The results are as follows:
n = 0.94 – 0.100 × teamera , R2 = 0.49, SER = 0.06.

Winpct
(0.08) (0.017)
n = –0.68 + 1.513 × ops , R2=0.45, SER = 0.06.

Winpct
(0.17) (0.221)
12
n = –0.19 – 0.099 × teamera + 1.490 × ops , R2=0.92, SER = 0.02.
Winpct
(0.08) (0.008) (0.126)
(a) Use the t-statistic to test for the statistical significance of the coefficient.
Answer: The t-statistics for team ERA and OPS are -12.38 and 11.83. Both of these are
highly significant.
(b) There are 30 teams in MLB. Does the small sample size worry you here when testing for
significance?
Answer: The t-statistic is only normally distributed in large samples. As a result,

inference is problematic here.
6) In the process of collecting weight and height data from 29 female and 81 male students
at your university, you also asked the students for the number of siblings they have.
Although it was not quite clear to you initially what you would use that variable for, you
construct a new theory that suggests that children who have more siblings come from
poorer families and will have to share the food on the table. Although a friend tells you
that this theory does not pass the “straight-face” test, you decide to hypothesize that peers
with many siblings will weigh less, on average, for a given height. In addition, you
believe that the muscle/fat tissue composition of male bodies suggests that females will
weigh less, on average, for a given height. To test these theories, you perform the
following regression:
n = –229.92 – 6.52 × Female + 0.51 × Sibs+ 5.58 × Height,

Studentw
(44.01) (5.52) (2.25) (0.62)
R2=0.50, SER = 21.08
where Studentw is in pounds, Height is in inches, Female takes a value of 1 for females
and is 0 otherwise, Sibs is the number of siblings (heteroskedasticity-robust standard
errors in parentheses).
(a) Carrying out hypotheses tests using the relevant t-statistics to test your two claims
separately, is there strong evidence in favor of your hypotheses? Is it appropriate to use
two separate tests in this situation?
Answer: The t-statistics for gender and number of siblings are -1.18 and 0.23
respectively. Neither coefficient is statistically significant at conventional
levels. If you wanted to test the two hypothesis simultaneously, then you should
use an F-test.
13
(b) You also perform an F-test on the joint hypothesis that the two coefficients for females
and siblings are zero. The calculated F-statistic is 0.84. Find the critical value from the F-
table. Can you reject the null hypothesis? Is it possible that one of the two parameters is
zero in the population, but not the other?
Answer: The critical value is 3.00 at the 5% level, and 4.61 at the 1% level. Hence you
cannot reject the null hypothesis. The hypothesis is that both coefficients are
zero, and this cannot be rejected. Had you rejected the null hypothesis, then the
alternative hypothesis states that one or both of the restrictions do not hold.
(c) You are now a bit worried that the entire regression does not make sense and therefore
also test for the height coefficient to be zero. The resulting F-statistic is 57.25. Does that
prove that there is a relationship between weight and height?
Answer: Although you cannot prove anything in this context with certainty, there is a
very high probability that there is a relationship between height and weight in
the population, given the sample result. The critical value from the F-table is
3.78 at the 1% level.
7) You have collected data for 104 countries to address the difficult questions of the
determinants for differences in the standard of living among the countries of the world.
You recall from your macroeconomics lectures that the neoclassical growth model
suggests that output per worker (per capita income) levels are determined by, among
others, the saving rate and population growth rate. To test the predictions of this growth
model, you run the following regression:
n = 0.339 – 12.894 × n + 1.397 × sK , R2=0.621, SER = 0.177

RelPersInc
(0.068) (3.177) (0.229)
where RelPersInc is GDP per worker relative to the United States, n is the average
population growth rate, 1980-1990, and sK is the average investment share of GDP from
1960 to1990 (remember investment equals saving). Numbers in parentheses are for
heteroskedasticity-robust standard errors.
(a) Calculate the t-statistics and test whether or not each of the population parameters are
significantly different from zero.
Answer: The t-statistics for population growth and the saving rate are –4.06 and 6.10,
making both coefficients significantly different from zero at conventional levels
of significance.
14
(b) The overall F-statistic for the regression is 79.11. What is the critical value at the 5% and
1% level? What is your decision on the null hypothesis?
Answer: The critical value is 3.00 and 4.61 respectively, allowing you to reject the null
hypothesis that all slope coefficients are zero.
(c) You remember that human capital in addition to physical capital also plays a role in
determining the standard of living of a country. You therefore collect additional data on
the average educational attainment in years for 1985, and add this variable (Educ) to the
above regression. This results in the modified regression output:
n = 0.046 – 5.869 × n + 0.738 × sK + 0.055 × Educ, R2=0.775, SER = 0.1377

RelPersInc
(0.079) (2.238) (0.294) (0.010)
How has the inclusion of Educ affected your previous results?
Answer: The coefficient on the population growth rate is roughly half of what it was
originally, while the coefficient on the saving rate has approximately doubled.
The regression R2 has increased significantly.
(d) Upon checking the regression output, you realize that there are only 86 observations,
since data for Educ is not available for all 104 countries in your sample. Do you have to
modify some of your statements in (d)?
Answer: When comparing results, you should ensure that the sample is identical, since
comparisons are not valid otherwise. In addition, there are now less than 100
observations, making inference based on the standard normal distribution
problematic.
8) Attendance at sports events depends on various factors. Teams typically do not change
ticket prices from game to game to attract more spectators to less attractive games.
However, there are other marketing tools used, such as fireworks, free hats, etc., for this
purpose. You work as a consultant for a sports team, the Los Angeles Dodgers, to help
them forecast attendance, so that they can potentially devise strategies for price
discrimination. After collecting data over two years for every one of the 162 home games
of the 2000 and 2001 season, you run the following regression:
n
Attend = 15,005 + 201 × Temperat + 465 × DodgNetWin + 82 × OppNetWin
(8,770) (121) (169) (26)
+ 9647 × DFSaSu + 1328 × Drain + 1609 × D150m + 271 × DDiv – 978 × D2001;
(1505) (3355) (1819) (1,184) (1,143)
R2=0.416, SER = 6983
15
where Attend is announced stadium attendance, Temperat it the average temperature on
game day, DodgNetWin are the net wins of the Dodgers before the game (wins-losses),
OppNetWin is the opposing team’s net wins at the end of the previous season, and
DFSaSu, Drain, D150m, Ddiv, and D2001 are binary variables, taking a value of 1 if the
game was played on a weekend, it rained during that day, the opposing team was within a
150 mile radius, the opposing team plays in the same division as the Dodgers, and the
game was played during 2001, respectively. Numbers in parentheses are
heteroskedasticity- robust standard errors.
(a) Are the slope coefficients statistically significant?
Answer: The t-statistics for Temperat, DodgNewWin, OppNetWin, and DFSaSu are all
statistically significant at the 5% level, using a one-sided test. The constant is
insignificant using a two-sided test. All the other coefficients are not statistically
significant at the 5% level.
(b) To test whether the effect of the last four binary variables is significant, you have your
regression program calculate the relevant F-statistic, which is 0.295. What is the critical
value? What is your decision about excluding these variables?
Answer: The critical value at the 5% level is 2.37. Hence you cannot reject the null
hypothesis that all four coefficients are simultaneously zero.
9) The administration of your university/college is thinking about implementing a policy of

coed floors only in dormitories. Currently there are only single gender floors. One reason
behind such a policy might be to generate an atmosphere of better “understanding”
between the sexes. The Dean of Students (DoS) has decided to investigate if such a
behavior results in more “togetherness” by attempting to find the determinants of the
gender composition at the dinner table in your main dining hall, and in that of a
neighboring university, which only allows for coed floors in their dorms. The survey
includes 176 students, 63 from your university/college, and 113 from a neighboring
institution.
The Dean’s first problem is how to define gender composition. To begin with, the survey
excludes single persons’ tables, since the study is to focus on group behavior. The Dean
also eliminates sports teams from the analysis, since a large number of single-gender
students will sit at the same table. Finally, the Dean decides to only analyze tables with
three or more students, since she worries about “couples” distorting the results. The Dean
finally settles for the following specification of the dependent variable:
GenderComp=|(50%-% of Male Students at Table)|
Where “|Z|” stands for absolute value of Z. The variable can take on values from zero to
fifty.
16
After considering various explanatory variables, the Dean settles for an initial list of
eight, and estimates the following relationship, using heteroskedasticity-robust standard
errors (this Dean obviously has taken an econometrics course earlier in her career and/or
has an able research assistant):
n = 30.90 – 3.78 × Size – 8.81 × DCoed + 2.28 × DFemme +2.06 × DRoommate

GenderComp
(7.73) (0.63) (2.66) (2.42) (2.39)
- 0.17 × DAthlete + 1.49 × DCons – 0.81 SAT + 1.74 × SibOther, R2=0.24, SER = 15.50
(3.23) (1.10) (1.20) (1.43)
where Size is the number of persons at the table minus 3, DCoed is a binary variable,
which takes on the value of 1 if you live on a coed floor, DFemme is a binary variable,
which is 1 for females and zero otherwise, DRoommate is a binary variable which equals
1 if the person at the table has a roommate and is zero otherwise, DAthlete is a binary
variable which is 1 if the person at the table is a member of an athletic varsity team,
DCons is a variable which measures the political tendency of the person at the table on a
seven-point scale, ranging from 1 being “liberal” to 7 being “conservative,” SAT is the
SAT score of the person at the table measured on a seven-point scale, ranging from 1 for
the category “900-1000” to 7 for the category “1510 and above,” and increasing by one
for 100 point increases, and SibOther is the number of siblings from the opposite gender
in the family the person at the table grew up with.
(a) Indicate which of the coefficients are statistically significant.
Answer: Only the constant, Size, and DCoed are statistically significant at the 5% level.
(b) Based on the above results, the Dean decides to specify a more parsimonious form by
eliminating the least significant variables. Using the F-statistic for the null hypothesis
that there is no relationship between the gender composition at the table and DFemme,
DRoommate, DAthlete, and SAT, the regression package returns a value of 1.10. What are
the degrees of freedom for the statistic? Look up the 1% and 5% critical values from the
F- table and make a decision about the exclusion of these variables based on the critical
values.
Answer: The F4, ∞ is 2.37 at the 5% level, and 3.32 at the 1% level. Hence you cannot
reject the null hypothesis that all four coefficients are zero.
17
(c) The Dean decides to estimate the following specification next:
n = 29.07 – 3.80 × Size – 9.75 × DCoed + 1.50 × DCons + 1.97 × SibOther,

GenderComp
(3.75) (0.62) (1.04) (1.04) (1.44)
R2=0.22 SER = 15.44
Calculate the t-statistics for the coefficients and discuss whether or not the Dean should
attempt to simplify the specification further. Based on the results, what might some of the
comments be that she will write up for the other senior administrators of your college?
What are some of the potential flaws in her analysis? What other variables do you think
she should have considered as explanatory factors?
Answer: The t-statistics for the five coefficients are as follows: 7.75, -6.13, -9.38, 1.44
and 1.37. The Dean should leave the specification as is and allow readers to
decide if they want to place much weight on the insignificant coefficients. The
variable of interest is DCoed and she will most likely focus on that, concluding
that having coed floors in dormitories will increase the gender balance at dining
hall tables. She will most likely go further in her report and suggest that
communication between the sexes will improve as a result of coed floors.
One of the major flaws in the analysis is that students from one college do not
have coed floors in dormitories while students from the other college do not
have single gender floors. Ideally you would like to survey students from the
same college where some of the students lived on single gender floors while
others did not. Answers on omitted variables will obviously vary. Ideally some
survey question should be included which would indicate the student’s attitude
towards the other sex.
10) The Solow growth model suggests that countries with identical saving rates and
population growth rates should converge to the same per capita income level. This result
has been extended to include investment in human capital (education) as well as
investment in physical capital. This hypothesis is referred to as the “conditional
convergence hypothesis,” since the convergence is dependent on countries obtaining the
same values in the driving variables. To test the hypothesis, you collect data from the
Penn World Tables on the average annual growth rate of GDP per worker (g6090) for the
1960-1990 sample period, and regress it on the (i) initial starting level of GDP per worker
relative to the United States in 1960 (RelProd60), (ii) average population growth rate of
the country (n), (iii) average investment share of GDP from 1960 to1990 (sK - remember
investment equals savings), and (iv) educational attainment in years for 1985 (Educ). The
results for close to 100 countries is as follows (numbers in parentheses are for
heteroskedasticity-robust standard errors):
18
gn
6090 = 0.004 - 0.172 × n + 0.133 × sK + 0.002 × Educ – 0.044×RelProd60,
(0.007) (0.209) (0.015) (0.001) (0.008)
2
R =0.537, SER = 0.011
(a) Is the coefficient on this variable significantly different from zero at the 5% level? At the
1% level?
Answer: The coefficient has a t-statistic of 5.50 and is therefore statistically significant at
both the 5% and the 1% level.
(b) Test for the significance of the other slope coefficients. Should you use a one-sided
alternative hypothesis or a two-sided test? Will the decision for one or the other influence
the decision about the significance of the parameters? Should you always eliminate
variables which carry insignificant coefficients?
Answer: The t-statistics are –0.82. 8.87, and 2.00. Hence the coefficient on population
growth is not statistically significant. You should use a one-sided alternative
hypothesis test since economic theory gives you information about the expected
sign on these variables. In the above case, the decision will not be influenced by
the choice of a one-sided or two-sided test, since the (absolute value of the)
critical value is 1.64 or 1.96 at the 5% significance level. If there is a strong
prior on the sign of the coefficient, then the variable should not be eliminated
based on the significance test. Instead it should be left in the equation, but the
low p-value should be flagged to the reader, and the reader should decide
herself how convincing the evidence is in favor of the theory.
Mathematical and Graphical Problems
1) Explain carefully why testing joint hypotheses simultaneously, using the F-statistic, does
not necessarily yield the same conclusion as testing them sequentially (“one at a time”
method), using a series of t-statistics.
Answer: Testing a joint hypothesis sequentially does not result in the desired
significance level. Even if this were not a problem, then the shape of the
confidence set of the textbook suggests another reason for this strategy to be
problematic. Drawing a confidence interval for both parameters and extending
the lines up and to the right, results in a rectangle, indicating the area where the
joint hypothesis would be rejected using the t-statistic. Obviously the
confidence set does not coincide with the rectangle, and there are therefore
various outcomes possible under which both strategies would come to the same
conclusion or different conclusions. Since the proper testing strategy involves
using the F-statistic, the t-statistic could result in improper inference under
circumstances where the two areas do not coincide.
19
2) Set up the null hypothesis and alternative hypothesis carefully for the following cases:
(a) k = 4, test for all coefficients other than the intercept to be zero
Answer: H 0 : β1 = 0, β 2 = 0, β3 = 0, β 4 = 0
(b) k = 3, test for the slope coefficient of X 1 to be unity, and the coefficients on the other
explanatory variables to be zero
Answer: H 0 : β1 = 1, β 2 = 0, β 3 = 0
(c) k = 10, test for the slope coefficient of X 1 to be zero, and for the slope coefficients of X 2
and X 3 to be the same but of opposite sign.
Answer: H 0 : β1 = 0, β 2 + β 3 = 0
(d) k = 4, test for the slope coefficients to add up to unity
Answer: H 0 : β1 + β 2 + β 3 + β 4 = 1
3) Consider a situation where economic theory suggests that you impose certain restrictions
on your estimated multiple regression function. These may involve the equality of
parameters, such as the returns to education and on the job training in earnings functions,
or the sum of coefficients, such as constant returns to scale in a production function. To
test the validity of your restrictions, you have your statistical package calculate the
corresponding F-statistic. Find the critical value from the F-distribution at the 5% and 1%
level, and comment whether or not you will reject the null hypothesis in each of the
following cases.
(a) number of observations: 152; number of restrictions: 3; F-statistic: 3.21
Answer: F3,∞ = 2.60 (5% level), F3,∞ = 3.78 (1% level). Reject the null hypothesis at the
5% level, but not at the 1% level.
(b) number of observations: 1,732; number of restrictions:7; F-statistic: 4.92
Answer: F7,∞ = 2.01 (5% level), F7,∞ = 2.64 (1% level). Reject the null hypothesis at the
5% level and at the 1% level.
20
(c) number of observations: 63; number of restrictions: 1; F-statistic: 2.47
Answer: F1,∞ = 3.84 (5% level), F1,∞ = 6.63 (1% level). Cannot reject the null hypothesis
at the 5% level or at the 1% level.
(d) number of observations: 4,000; number of restrictions: 5; F-statistic: 1.82
Answer: F5,∞ = 2.21 (5% level), F5,∞ = 3.02 (1% level). Cannot reject the null hypothesis
at the 5% level or at the 1% level.
(e) Explain why you can use the Fq,∞ distribution to compute the critical values in (a)-(d).
Answer: The F-statistic is distributed Fq,∞ in large samples. Although strictly speaking
this only holds for the limiting case of n = ∞ , for practical purposes the
approximation is close for n > 100. This is therefore problematic for (c) above,
where n = 63.
4) Females, on average, are shorter and weigh less than males. One of your friends, who is a
pre-med student, tells you that in addition, females will weigh less for a given height. To
test this hypothesis, you collect height and weight of 29 female and 81 male students at
your university. A regression of the weight on a constant, height, and a binary variable,
which takes a value of one for females and is zero otherwise, yields the following result:
n = –229.21 – 6.36 × Female + 5.58 × Height , R2=0.50, SER = 20.99

Studentw
(43.39) (5.74) (0.62)
where Studentw is weight measured in pounds and Height is measured in inches

(heteroskedasticity-robust standard errors in parentheses).
Calculate t-statistics and carry out the hypothesis test that females weigh the same as
males, on average, for a given height, using a 10% significance level. What is the
alternative hypothesis? What is the p-value? What critical value did you use?
Answer: The t-statistics for the intercept, the gender binary variable, and the height
variable are -5.28, -1.11, and 9.00, respectively. For a one-sided alternative
hypothesis, β Female < 0 , the critical value from the standard normal table is
–1.28. Hence you cannot reject the null hypothesis at the 10% level. The p-
value is 13.4%.
21
5) You are presented with the following output from a regression package, which
reproduces the regression results of testscores on the student-teacher ratio from your
textbook
Dependent Variable: TESTSCR

Method: Least Squares
Date: 07/30/06 Time: 17:44
Sample: 1 420
Included observations: 420
Variable Coefficient Std. Error t-Statistic Prob.
C 698.93 9.47 73.82 0.00

STR -2.28 0.48 -4.75 0.00
R-squared 0.05 Mean dependent var 654.16

Adjusted R-squared 0.05 S.D. dependent var 19.05
S.E. of regression 18.58 Akaike info criterion 8.69
Sum squared resid 144315.48 Schwarz criterion 8.71
Log likelihood -1822.25 F-statistic 22.58
Durbin-Watson stat 0.13 Prob(F-statistic) 0.00
Std. Error are homoskedasticity only standard errors.
a) What is the relationship between the t-statistic on the student-teacher ratio coefficient and
the F-statistic?
Answer: The F-statistic tests the null hypothesis that all slope coefficients are zero. In the
case of a single explanatory variable, this is the same as testing for the
significance of the explanatory variable coefficient. In that case, the F-statistic
is the same as the square of the t-statistic in the case of a single restriction (q =
1).
b) Next, two explanatory variables, the percent of English learners (EL_PCT) and
expenditures per student (EXPN_STU) are added. The output is listed as below. What is
the relationship between the three t-statistics for the slopes and the homoskedasticity-only
F-statistic now?
22
Date: 07/30/06 Time: 17:55
Sample: 1 420
C 649.58 15.21 42.72 0.00

STR -0.29 0.48 -0.60 0.55
EL_PCT -0.66 0.04 -16.78 0.00
EXPN_STU 0.00 0.00 2.74 0.01

Answer: There is no simple relationship between the F-statistic and the three t-statistics
now. The F-statistic tests the null hypothesis that
H 0 : β STR = β EL _ PCT = β EXPN _ STU = 0 simultaneously. The t-statistics test the
significance of each slope coefficient separately.
6) Consider the following multiple regression model
Yi = β 0 + β 1 X 1i + β 2 X 2i + β 3 X 3i + u i
You want to consider certain hypotheses involving more than one parameter, and you
know that the regression error is homoskedastic. You decide to test the joint hypotheses
using the homoskedasticity-only F-statistics. For each of the cases below specify a
restricted model and indicate how you would compute the F-statistic to test for the
validity of the restrictions.
(a) β1 = − β 2 ; β 3 = 0
Answer: The restricted model is Yi = β 0 + β 2 ( X 2i − X 1i ) + ui and the rule-of-thumb F-

( SSRrestricted − SSRunrestricted ) / 2
statistic would be F = .
SSRunrestricted / n − 3 − 1)
23
(b) β1 + β 2 + β 3 = 1
Answer: (Yi − X 3i ) = β 0 + β1 ( X 1i − X 3i ) + β 2 ( X 2i − X 3i ) + ui and the rule-of-thumb F-

( SSRrestricted − SSRunrestricted ) /1
statistic would be F =
SSRunrestricted / n − 3 − 1)
(c) β1 = β 2 ; β 3 = 0
Answer: Yi = β 0 + ( β1 X 1i + X 2i ) + ui and the homoskedasticity-only F-statistic would be
( SSRrestricted − SSRunrestricted ) / 2
F=
SSRunrestricted /(n − 3 − 1)
7) Give an intuitive explanation for F = . Name conditions
under which the F-statistic is large and hence rejects the null hypothesis.
Answer: First rewrite
( SSRrestricted − SSRunrestricted ) / q ( SSRrestricted − SSRunrestricted ) (n − kunrestricted − 1)

F= = ×
SSRunrestricted /(n − kunrestricted − 1) SSRunrestricted q
The numerator for the first expression is the difference between the sum of
squared residuals between the restricted and the unrestricted model. Anytime
you place restrictions on the model, the SSR will increase (or, strictly speaking,
at least no decrease). Hence if the explanatory power (SSR) of your regression
decreases (increase) by much as a result of the restrictions you have placed on
the model, then the numerator will be large. However, the SSR depend on units
of measurement. To make the first expression independent of the units of
measurement, the difference is divided by the unrestricted residual sums of
squares. The first fraction now represents the percentage increase in the SSR that
result from the imposition of the restrictions. The second fraction has the
degrees of freedom of the denominator in its numerator, and the degrees of
freedom of the numerator in its denominator. The degrees of freedom of the
numerator is the difference of the degrees of freedom of the restricted and the
unrestricted regression respectively, i.e.,
(n − krestricted − 1) − (n − kunrestricted − 1) = kunrestricted − krestricted = q .
As the degrees of freedom (number of observations) increase, we are closer to
observing the population rather than the sample. Since the null hypothesis is a
statement about the population, even small differences in parameters should
become statistically significant eventually.
24
( SSRrestricted − SSRunrestricted ) / q 2
( Runrestricted − Rrestricted
2
/q
8) Prove that F = =
SSRunrestricted /(n − kunrestricted − 1) 1 − Runrestricted /(n − kunrestricted − 1)
2
Answer: Note that SSR = TSS − ESS . Hence we get

(TSS − ESS restricted − (TSS − ESSunrestricted )) / q
F= . Next, dividing numerator and
(TSS − ESSunrestricted ) /(n − kunrestricted − 1)
ESSunrestricted ESSrestricted
− /q
denominator by TSS, gives us F = TSS TSS . Since
TSS − ESSunrestricted
/(n − kunrestricted − 1)
TSS
ESS
R2 = , this gives us the expression we were looking for.
TSS
9) To calculate the homoskedasticity-only overall regression F-statistic, you need to

compare the SSRrestricted with the SSRurrestricted . Consider the following output from a
regression package, which reproduces the regression results of testscores on the student-
teacher ratio, the percent of English learners, and the expenditures per student from your
textbook:

Date: 07/30/06 Time: 17:55
Sample: 1 420
C 649.58 15.21 42.72 0.00

STR -0.29 0.48 -0.60 0.55
EL_PCT -0.66 0.04 -16.78 0.00
EXPN_STU 0.00 0.00 2.74 0.01

Sum of squared resid corresponds to SSRunrestricted . How are you going to find SSRrestricted ?
25
Answer: You could simply run a regression of Testscr on a constant. However, for the
case
n = βm + β l × STR + β l l l
Testscore i 0 STR i EL _ PCT × EL _ PCTi + β EXPN _ STU × EXPN _ STU i + ui
the restricted residuals are Yl = βm + ul , and for the restricted sum of square
i 0 i
residuals, you get simply the variation in

n
testscores SSRrestricted = ∑ (Testscorei − Testscore) 2 .
i =1
10) Adding the Percent of English Speakers (PctEL) to the Student Teacher Ratio (STR) in
your textbook reduced the coefficient for STR from 2.28 to 1.10 with a standard error of
0.43. Construct a 90% and 99% confidence interval to test the hypothesis that the
coefficient of STR is 2.28.
Answer: The 90% confidence interval is (1.10 ± 1.64× 0.43) = (0.39, 1.81). The 99%
confidence interval is (-0.01, 2.21). Hence you can reject the null hypothesis at
both the 90% and 99% confidence level.
11) The homoskedasticity only F-statistic is given by the formula
F=
SSRunrestricted /( n − k unrestricted − 1)
where SSRrestricted is the sum of squared residuals from the restricted regression,
SSRunrestricted is the sum of squared residuals from the unrestricted regression, q is the
number of restrictions under the null hypothesis, and kunrestricted is the number of
regressors in the unrestricted regression. Prove that this formula is the same as the
following formula based on the regression R2 of the restricted and unrestricted regression:
( ESSunrestricted − ESSrestricted ) / q
F=
1 − ESSunrestricted /(n − kunrestricted − 1)
Answer: Note that SSR = TSS − ESS . Hence we get

(TSS − ESS restricted − (TSS − ESSunrestricted )) / q
F= , which gives the above
(TSS − ESSunrestricted ) /(n − kunrestricted − 1)
expression once the TSS in the numerator are cancelled.
26
12) Trying to remember the formula for the homoskedasticity-only F-statistic, you forgot
whether you subtract the restricted SSR from the unrestricted SSR or the other way
around. Your professor has provided you with a table containing critical values for the F
distribution. How can this be of help?
Answer: All the values in the F table are positive. Hence the correct answer must produce
a positive value in the numerator and denominator (or negative expressions in
( SSR? − SSR? ) / q
both). But F = and hence the denominator is
positive. Hence for the numerator to be also positive, you must have
SSRrestricted − SSRunrestricted .
13) Consider the following regression output for an unrestricted and a restricted model.
Unrestricted model:

Date: 07/31/06 Time: 17:35
Sample: 1 420
C 658.47 7.68 85.73 0.00

STR -0.76 0.23 -3.27 0.00
EL_PCT -0.19 0.03 -5.62 0.00
LOG(AVGINC) 11.69 1.74 6.71 0.00
MEAL_PCT -0.37 0.04 -9.53 0.00
CALW_PCT -0.07 0.06 -1.21 0.23

27
Restricted model:

Date: 07/31/06 Time: 17:37
Sample: 1 420
C 593.48 6.96 85.32 0.00

STR -0.39 0.27 -1.42 0.16
EL_PCT -0.43 0.03 -14.34 0.00
LOG(AVGINC) 28.36 1.40 20.32 0.00

Calculate the homoskedasticity only F-statistic and determine whether the null hypothesis
can be rejected at the 5% significance level.
Answer: There are two restrictions, namely H 0 : β meal _ pct = 0, β calw _ pct = 0 . The F-statistic
⎛ 43792.42 ⎞ 420 − 5 − 1
is F = ⎜ − 1⎟ × = 86.47 . The 5% critical value from the
⎝ 30888.64 ⎠ 2
F2,∞ distribution is 3.00. Hence we easily reject the two restrictions at the 5%
level of significance.
28
14) Consider the regression output from the following unrestricted model:
Unrestricted model:

Date: 07/31/06 Time: 17:35
Sample: 1 420
C 658.47 7.68 85.73 0.00

STR -0.76 0.23 -3.27 0.00
EL_PCT -0.19 0.03 -5.62 0.00
LOG(AVGINC) 11.69 1.74 6.71 0.00
MEAL_PCT -0.37 0.04 -9.53 0.00
CALW_PCT -0.07 0.06 -1.21 0.23

To test for the null hypothesis that neither coefficient on the percent eligible for
subsidized lunch nor the coefficient on the percent on public income assistance is
statistically significant, you have your statistical package plot the confidence set.
Interpret the following graph and explain what it tells you about the null hypothesis.
29
.10
.05
.00
C(6) -.05
-.10
-.15
-.20
-.25
-.48 -.44 -.40 -.36 -.32 -.28 -.24
C(5)
Answer: The dot in the center of the ellipse is the point estimate for the two coefficients
(-0.37,-0.07). Since the (0,0) point is not inside the ellipse, you reject the null
hypothesis.
15) Consider the regression model Yi = β 0 + β 1 X 1i + β 2 X 2i + β 3 X 3i + u i . Use “Approach #2”

from Section 7.3 to transform the regression so that you can use a t-statistic to test:
β2
β1 =
β3
Answer: This is not a linear restriction. Hence you cannot use the F-test to test for its
validity.
16) Consider the following Cobb-Douglas production function Yi = AK iβ1 Lβi 2 eui (where Y is
output, A is the level of technology, K is the capital stock, and L is the labor force), which
has been linearized here (by using logarithms) to look as follows:
yi = β 0* + β1ki + β 2li + ui
Assuming that the errors are heteroskedastic, you want to test for constant returns to
scale. Using a t-statistic and “Approach #2,” how would you proceed.
30
Answer: Under constant returns to scale, β1 + β 2 = 1 . Hence you need to transform the
unrestricted model above by subtracting l from both sides, and by adding and
subtracting β1li . This results in ( yi − li ) = β 0* + β1 (ki − li ) + ( β1 + β 2 − 1)li + ui .
The left hand side variable is now the (log of the) output-labor ratio, and the
first explanatory variable on the right hand side is the (log of the) capital-labor
ratio. If the null hypothesis of constant returns to scale holds, then the
coefficient on l should be zero. This can be directly tested using a t-statistic.
17) Consider the following two models to explain testscores.
Model 1:
Date: 07/31/06 Time: 17:52
Sample: 1 420
C 658.55 7.68 85.70 0.00

STR -0.73 0.23 -3.18 0.00
EL_PCT -0.18 0.03 -5.52 0.00
LOG(AVGINC) 11.57 1.74 6.65 0.00
MEAL_PCT -0.40 0.03 -13.09 0.00

:
31
Model 2:
Date: 07/31/06 Time: 17:56
Sample: 1 420
C 620.92 7.27 85.41 0.00

STR -0.66 0.25 -2.58 0.01
EL_PCT -0.39 0.03 -14.05 0.00
LOG(AVGINC) 21.87 1.52 14.41 0.00
CALW_PCT -0.41 0.05 -8.22 0.00

Explain why you cannot use the F-test in this situation to discriminate between Model 1
and Model 2.
Answer: Neither model is contained (“nested”) in the other, in the sense that you cannot
place restrictions on Model 1 to obtain Model 2 (and vice versa). Hence there is
no unrestricted and restricted model in this case.
32
18) Your textbook has emphasized that testing two hypothesis sequentially is not the same as
testing them simultaneously. Consider the following confidence set below, where you are
testing the hypothesis that H 0 : β5 = 0, β 6 = 0 .
Your statistical package has also generated a dotted area, which corresponds to drawing
two confidence intervals for the respective coefficients. For each case where the ellipse
does not coincide in area with the corresponding rectangle, indicate what your decision
would be if you relied on the two confidence intervals vs. the ellipse generated by the F-
statistic.
Answer: The following possible outcomes can be seen in the figure above: (i) both F-
statistic and the two confidence intervals generate the same result; (ii) you do
not reject the null hypothesis using the F-statistic, but you do so by using the
confidence intervals (these are the points in the area at the “tip” of the ellipse);
(iii) you reject the null hypothesis using the confidence intervals but not the F-
statistic.
33
19) You have estimated the following regression to explain hourly wages, using a sample of
250 individuals:
AHEi = −2.44 − 1.57 × DFemme + 0.27 × DMarried + 0.59 × Educ + 0.04 × Exper − 0.60 × DNonwhite
(1.29) (0.33) (0.36) (0.09) (0.01) (0.49)
+0.13 × NCentral − 0.11× South

(0.59) (0.58)
R 2 = 0.36, SER = 2.74, n = 250
Numbers in parenthesis are heteroskedasticity robust standard errors. Add “*”(5%) and
“**” (1%) to indicate statistical significance of the coefficients.
Answer: AHEi = −2.44 − 1.57** × DFemme + 0.27 × DMarried + 0.59** × Educ

(1.29) (0.33) (0.36) (0.09)
+0.04 × Exper − 0.60 × DNonwhite + 0.13 × NCentral − 0.11× South
**
(0.01) (0.49) (0.59) (0.57)
20) You have estimated the following regression to explain hourly wages, using a sample of
250 individuals:
AHEi = −2.44 − 1.57 × DFemme + 0.27 × DMarried + 0.59 × Educ + 0.04 × Exper − 0.60 × DNonwhite
(1.29) (0.33) (0.36) (0.09) (0.01) (0.49)
+0.13 × NCentral − 0.11× South

(0.59) (0.58)
R 2 = 0.36, SER = 2.74, n = 250
Test the null hypothesis that the coefficients on DMarried, DNonwhite, and the two
regional variables, NCentral and South are zero. The F-statistic for the null hypothesis
β married = β nonwhite = β ncentral = β south = 0 is 0.61. Do you reject the null hypothesis?
Answer: The critical value for F4,∞ =3.32 at the 1% significance level. Hence you cannot
reject the null hypothesis.
34
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Thiers was once more with the Chief from 9 p.m. until after 11
o’clock. While they were conferring a telegram arrived announcing
that Beust has abandoned his former attitude in so far as he
declares that if Russia raises objections to the Prussian demands
upon France, Austria will do the same, but otherwise not. This
telegram was at once sent in to the Chief.
Saturday, November 5th.—About 1 o’clock there was a short
conference between the Chancellor, Delbrück, and other German
Ministers. We afterwards ascertained that the Chief reported the
result of his negotiations with Thiers, and also announced the
impending arrival of the German Sovereigns not yet represented at
Versailles.
On our sitting down to dinner Delbrück was at first the only
Minister present. Later on we were joined by the Chancellor, who
had dined with the King. While Engel was pouring him out a glass of
spirits the Chief recalled a pretty dictum. Recently a general (if I am
not mistaken it was at Ferrières, and I fancy I heard the name of the
great thinker, Moltke), speaking of the various beverages of
mankind, laid down the following principle:—“Red wine for children,
champagne for men, and brandy for generals.”
The Chancellor, who had been dining with the King, joined us in
the evening and complained to Delbrück of the way in which he had
been beset at the King’s quarters by the Princes, who prevented him
from discussing something of importance with Kutusow. “I really
could not talk to him properly. The Serene Highnesses fluttered
about me like crows round a screech-owl, and tore me away from
him. Each of them seemed to delight in being able to buttonhole me
longer than the others. At length I asked Prince Charles if he could
not get his brother-in-law to wait until I had finished what I had to say
to Kutusow, as it was an important matter of State. But although I
have often spoken to him previously in the same sense he did not
seem to understand me, and the end of it was that he took
offence.”... “At last they heard that the leg or the back of the old
coronation chair had been discovered in one of the other rooms, and
they all trooped off to inspect the wonder, while I took this
opportunity to bolt.” At that moment a despatch was delivered stating
that Favre and the other members of the Government in Paris had
once more got on the high horse, and proclaimed that they would not
hear of a cession of territory, and that their sole task was the defence
of the fatherland. The Chief observed: “Well, then, we need not
negotiate any further with Thiers.”
Later on the Minister said that Thiers probably still intended to
write another historical work. “Time after time he spins out our
negotiation by introducing irrelevant matters. He relates what has
occurred or been advised here and there, inquires as to the attitude
of this or that person, and what would have happened in such and
such circumstances. He reminded me of a conversation I had with
the Duc de Bauffremont in the year 1867, in the course of which I
said that in 1866 the Emperor had not understood how to take
advantage of the situation, that he could have done a good stroke of
business although not on German soil, &c. Roughly that is quite
correct. I remember it very well. It was in the gardens of the Tuileries,
and a military band was playing. In the summer of 1866 Napoleon
lacked courage to do what he ought to have done from his point of
view. When we attacked Austria he should have occupied ——, the
object of the Benedetti proposal, and held it as a pledge. We could
not have prevented him at that time, and most probably England
would not have stirred—in any case he could have waited. If the
coup succeeded he might have placed himself back to back with us,
encouraging us to further aggression. But (turning to Delbrück, first
leaning a little forward and then sitting straight upright, a habit of his
on such occasions), he is and remains a muddle-headed fellow.”
Thiers, after having had a conversation with Favre and Ducrot on
the bridge of Sèvres, returned and had another conference with the
Chief which lasted from 8.30 to 9.30. Favre and Ducrot had declared
that our conditions for an armistice could not be accepted, but that
they would ascertain the opinions of their colleagues, and bring
Thiers a definite answer to-morrow.
Sunday, November 6th.—The Chief read to us at dinner a portion
of his wife’s letter which was to the following effect:—“I fear you will
not be able to find a Bible in France, and so I shall shortly send you
the Psalms in order that you may read the prophecies against the
French—‘I tell thee, the godless shall be destroyed!’” The Minister
had also received a “despairing letter” from Count Herbert, whose
wound was now healed, because he had been transferred to a
depôt. “He says that all he has had out of the whole war has been a
fortnight’s ride with his regiment and then three months on his back. I
wished to see whether anything could be done, and to-day I met the
Minister of War. He dissuaded me, however, with tears in his eyes—
he had once interfered in a similar way and lost his son in
consequence.”
Monday, November 7th.—Early in the morning the Chief instructs
me to telegraph to London: “In the negotiations with M. Thiers, which
lasted for five days, he was offered an armistice of any duration up to
twenty-eight days on the basis of the military status quo, for the
purpose of holding elections, which should also be allowed to take
place in the portions of France occupied by the German troops; or,
as an alternative, our assistance and sanction for holding the
elections without a truce. After a renewed conference with the Paris
Government at the outposts, M. Thiers was not authorised to accept
either of these offers. He demanded first of all permission to
provision Paris, without offering any military equivalent. As this
proposal could not be accepted by the Germans on military grounds,
M. Thiers yesterday received instructions from Paris to break off the
negotiations.”
The following particulars have been ascertained from other
sources: The instruction referred to, was received by Thiers in the
form of a curt letter from Favre desiring him to return to Tours,
whither he has gone, to-day. The Chancellor tells me that Thiers was
very depressed at the foolish obstinacy of the Paris Government, of
which both he himself and several of the Ministers disapprove. Favre
and Picard, particularly the latter, are desirous of peace, but are too
weak to withstand the opposition of the others. Gambetta and
Trochu will not hear of the elections, which would in all probability put
an end to their rule.
I write articles to the following effect: We were prepared to do
everything possible, but all our concessions were rejected owing to
the ambition of MM. Favre and Trochu, who do not want to be forced
by the true representatives of the French people to give up the
power which fell into their hands through an insurrection. It is that
ambition alone which prolongs the war. We, on the other hand, have
shown that we desire peace, by carrying our complaisance to the
utmost point.
The postponement of the bombardment was again discussed at
dinner. The Chancellor said he could not understand the absurd
rumour circulated in the newspapers, to the effect that he was
opposed to the bombardment while the military authorities were
pressing for it. “Exactly the contrary is the case. No one is more
urgent in favour of it than I am, and it is the military authorities who
hesitate. A great deal of my correspondence is taken up in dispelling
the scruples and excessive circumspection of the military people. It
appears that the artillery are constantly requiring more time for
preparation and particularly a larger supply of ammunition. At
Strassburg, they also asked for much more than was necessary, as
notwithstanding the foolish waste of powder and shell, two-thirds of
the supply collected was never used.” Alten objected that even if the
forts in question were captured they would be then subjected to the
fire from the enceinte, and we should have to begin over again. “That
may be,” said the Minister, “but they ought to have known that
sooner, as there was no fortress we knew so much about from the
commencement as Paris.”
Somebody remarked that in the two balloons that had been
seized five persons had been taken prisoners. The Chief considered
that they ought to be treated as spies without any lengthy
deliberation. Alten said they would be brought up before a court-
martial, whereupon the Minister exclaimed, “Well, nothing will
happen to them there!” He then observed how stout and strong
Count Bill was. At his age he himself was slight and thin. “At
Göttingen I was as thin as a knitting-needle.” Mention having been
made of the circumstance that the sentry posted outside the villa
occupied by the Crown Prince had been shot at and wounded the
night before, and that the town would be obliged to pay him five
thousand francs as compensation, the Chief said that in going out in
the evening he would not take his sword but rather a revolver—“as
although in certain circumstances I should be quite willing to let
myself be murdered, I should not like to die unavenged.”
After dinner I was instructed by the Chancellor to again telegraph
an account of the negotiations with Thiers, only in a somewhat
different form. On my venturing to observe that the contents of the
despatch had been telegraphed in the morning he replied, “Not quite
accurately; you see here ‘Count Bismarck proposed, &c.’ You must
notice such fine shades if you want to work in the first Foreign Office
of the world.”
Tuesday, November 8th.—In the morning I sent off a telegram
stating that the prisoners taken in the balloons have been
transported to a Prussian fortress in order to be tried there by court-
martial. Furthermore that the confiscated letters compromised
diplomats and other personages who have been permitted to remain
in communication with the outer world out of consideration for their
position and sense of honour. Such communication would no longer
be tolerated.
At about 12.30 p.m., while we were at lunch, the Chief received a
visit from Archbishop Ledochowski of Posen, and it was understood
that his business was to submit an offer of the Pope to intervene with
the French Government. They probably hope in this way to purchase
the intervention of the German Government on behalf of the Holy
Father. The Archbishop remained till nearly 3 o’clock, and on his
leaving the Chief went to see the King. He subsequently took dinner
at the Crown Prince’s, where the Grand Duke of Baden, who had
arrived in the meantime, also dined.
Delbrück, General Chauvin, and Colonel Meidam, the officer in
command of the Field Telegraph, were the Chief’s guests at dinner.
Mention was made of the improper use of the telegraph wire by
distinguished personages for their private purposes.
After a while the Chancellor remarked: “I hear that the
Augustenburger also telegraphs. That really should not be. Nor has
the Coburger any right to do so. The telegraph is for military and
diplomatic purposes, and not for minor potentates to use for inquiries
respecting their kitchens, stables and theatres. None of them has
any rights here. Their rights ceased on passing the German frontier.”
On some one referring to the destruction of the telegraph wires
and other similar misconduct on the part of franctireurs and peasants
near Epernay, the Minister said: “They should have immediately sent
three or four battalions there, and transported six thousand peasants
to Germany until the conclusion of the war.”
Amongst other subjects discussed at tea was the rumour that the
postponement of the bombardment was in part due to the influence
of ladies, the Queen and the Crown Princess being mentioned in this
connection. The Chief was in the drawing-room engaged in
conference with the Bavarian General von Bothmer on the military
question in connection with the closer unification of Germany now in
progress. The Minister joined us afterwards, remaining for about an
hour. On sitting down he breathed a deep sigh and said: “I was
thinking just now, what I have indeed often thought before—If I could
only for five minutes have the power to say: ‘That must be done thus
and in no other way!’—If one were only not compelled to bother
about the ‘why’ and the ‘wherefore,’ and to argue and plead for the
simplest things!—Things made much more rapid progress under
men like Frederick the Great, who were generals themselves and
also knew something about administration, acting as their own
Ministers. It was the same with Napoleon. But here, this eternal
talking and begging!”
After a while the Chief said, with a laugh: “I have been busy to-
day educating princes.”
“How so, Excellency?” asked Hatzfeldt.
“Well, I have explained to various gentlemen at the Hôtel des
Reservoirs what is and what is not proper. I have given the
Meininger to understand through Stein that he is not to be allowed to
use the Field Telegraph for giving instructions about his kitchen
garden and theatre. And the Coburger is still worse. Never mind, the
Reichstag will set that right and put a stop to all that kind of thing.
But only I shall not be there.”
Hatzfeldt asked: “Has your Excellency seen that the Italians have
broken into the Quirinal?”
“Yes, and I am curious to know what the Pope will now do. Leave
the country? But where can he go? He has already requested us to
ask the Italians whether he would be allowed to leave and with fitting
dignity. We did so, and they replied that the utmost respect would be
paid to his position, and that their attitude would be governed by that
determination in case he desired to depart.”
“They would not like to see him go,” added Hatzfeldt; “it is in their
interests that he should remain in Rome.”
The Chief: “Yes, certainly. But perhaps he may be obliged to
leave. But where could he go? Not to France, because Garibaldi is
there. He would not like to go to Austria. To Spain? I suggested to
him Bavaria.” The Minister then reflected for a moment, after which
he continued: “There remains nothing for him but Belgium or North
Germany. As a matter of fact he has already asked whether we
could grant him asylum. I have no objection to it—Cologne or Fulda.
It would be passing strange, but after all not so very inexplicable,
and it would be very useful to us to be recognised by Catholics as
what we really are, that is to say, the sole power now existing that is
capable of protecting the head of their Church. Stofflet and Charette,
together with their Zouaves, could then go about their business. We
should have the Poles on our side. The opposition of the
Ultramontanes would cease in Belgium and Bavaria. Malinkrott
would come over to the Government side. But the King will not
consent. He is terribly afraid. He thinks all Prussia would be
perverted, and he himself would be obliged to become a Catholic. I
told him, however, that if the Pope begged for asylum he could not
refuse it. He would have to grant it as ruler over ten million Catholic
subjects who would desire to see the head of their Church protected.
Besides, imaginative people, particularly women, may possibly feel
drawn towards Catholicism by the pomp and ritual of St. Peter’s, with
the Pope seated upon his throne and bestowing his benediction. The
danger would not be so great, however, in Germany, where the
people would see the Pope amongst them as a poor old man
seeking assistance—a good old gentleman, one of the Bishops, who
ate and drank like the rest, took his pinch of snuff, and even perhaps
smoked a cigar. And after all even if a few people in Germany
became Catholic again (I should certainly not do so) it would not
matter much so long as they remained believing Christians. The
particular sect is of no consequence, only the faith. People ought to
be more tolerant in their way of thinking.” The Chief then dilated on
the comic aspect of this migration of the Pope and his Cardinals to
Fulda, and concluded: “Of course the King could not see the
humorous side of the affair. But (smiling) if only the Pope remains
true to me I shall know how to bring his Majesty round.”
Some other subjects then came up. Hatzfeldt mentioned that his
Highness of Coburg had fallen from his horse. “Happily, however,
without being hurt,” hastily added Abeken, with a pleased
expression. This led the Chief to speak of similar accidents that had
happened to himself.
“I believe I shall be more than within the mark in saying that I
must have fallen from horseback fifty times. It is nothing to be thrown
from your horse, but when the horse lies on top of you, then it’s a
bad case. The last time was at Varzin, when I broke three ribs. I
thought it was all up with me. It was not, however, so dangerous as it
seemed, but it was terribly painful.... But as a young man I had a
remarkable accident, which shows how our thinking powers are
dependent upon the brain. I was riding home one evening with my
brother, and we were both galloping as hard as our horses could go.
Suddenly my brother, who was in front, heard a fearful bang. It was
my head that had struck against the road. My horse had shied at a
lantern in a cart coming in the opposite direction, and reared so that
he fell backwards, and I tumbled on my head. At first I lost
consciousness, and on returning to my senses my power of thinking
remained on some points quite clear, but had quite deserted me on
others. I examined my horse and found that the saddle was broken,
so I called the groom and rode home on his horse. When the dogs
there barked at me by way of greeting, I thought they did not belong
to us, got cross with them and drove them away. Then I said the
groom had fallen from his horse and they should send a stretcher to
bring in; and I got very angry when, taking their cue from my brother,
they showed no disposition to move. Were they going to leave the
unfortunate man lying in the road? I did not know that I was myself
and was at home, or rather I was both myself and the groom. I asked
for something to eat and afterwards went to bed. After having slept
through the night I woke up next morning all right again. It was a
strange case. I had examined the saddle, taken another horse, and
so forth. I had done everything that was practically required. In that
respect the fall had produced no confusion in my ideas. A singular
example which shows that the brain harbours various intellectual
powers—only one of these had remained stupefied by my fall for a
somewhat longer time.
“I well remember another incident of the kind. I was riding rapidly
through some young timber in a large wood a considerable distance
from home. As I was crossing over a hollow road the horse stumbled
and fell, and I lost consciousness. I must have lain there senseless
for about three hours, as it was already twilight by the time I stirred.
The horse was standing near me. As I said, the place was at a great
distance from our estate, and I was entirely unacquainted with the
district. I had not yet quite recovered my senses, but on this
occasion also I did what was necessary. I took off the martingale,
which was broken, and followed the road across a rather long bridge
which, as I then ascertained, was the nearest way to a farm in the
neighbourhood. The farmer’s wife ran away on seeing a big man
standing before her with his face all covered with blood. Her
husband, however, came to me and wiped away the blood. I told him
who I was, and as I was hardly fit for such a long ride home I asked
him to drive me there, which he accordingly did. I must have been
shot fifteen feet out of the saddle and fallen against the root of a tree.
On the doctor examining my injuries, he said it was against all the
rules of his art that I had not broken my neck.
“I have also been a couple of other times in danger of my life,”
continued the Chief. “For instance, before the Semmering railway
was finished (I believe it was in 1852) I went with a party through one
of the tunnels. It was quite dark inside. I went ahead with a lantern.
Now right across the floor of the tunnel was a rift or gully, which must
have been about fifteen feet deep and half as wide again as this
table. A plank was laid across it, with a raised skirting board on both
sides to prevent the wheelbarrows from slipping off. This plank must
have been rotten, as when I reached the middle it broke in two and I
fell down; but having probably involuntarily stretched out my arms, I
remained hanging on the skirting. The lantern having gone out, those
behind thought I had fallen into the gully, and were not a little
surprised when the reply to their question, ‘Are you still alive?’
instead of coming from the depths below came from just under their
feet. I answered, ‘Yes, here I am.’ I had in the meantime recovered
hold also with my feet, and I asked whether I should go on or come
back. The guide thought I had better go on to the other side, and so I
worked my way over. The workman who acted as our guide then
struck a light, got another plank, and brought the party across. That
plank was a good example of the slovenly way in which such things
were managed in Austria at that time; because I cannot believe that
it was intentional. I was not hated in Vienna then as I am now—on
the contrary.”
Thursday, November 10th.—In the morning I am instructed by the
Chief to telegraph that great distress has been occasioned in
France, and that still more is to be anticipated, in consequence of the
application by the Provisional Government of Savings Bank funds for
the relief of the poor, and of the property of corporations, to military
purposes. I had permission to study the documents connected with
the abortive negotiations for an armistice.
Thiers had stated in a memorandum the principles which he, and
the French Government which he represented, regarded as a basis
for the proposed armistice. It was to the following effect: The object
of the understanding was to put an end as soon as possible to the
bloodshed, and to permit the convocation of a National Assembly
which would represent the will of France in dealing with the
European Powers, and be in a position sooner or later to conclude
peace with Prussia and her allies. The armistice must last for twenty-
eight days, of which twelve would be required for canvassing the
constituencies, one for the polling, five for the elected deputies to
meet in some given place, and ten for examining the returns and
appointing the bureau of the Assembly. Tours might for the present
remain the seat of such an Assembly. The elections must be allowed
to take place free and unhindered in all parts of France, including
those occupied by the Prussians. Military operations on both sides to
cease, although both parties would be at liberty to enlist recruits and
proceed with works of defence. The armies to be at liberty to obtain
for themselves supplies of provisions, but requisitions on the other
hand to be suspended as “constituting a military operation which
should cease together with other hostilities.” Moreover fortified
places were to be provisioned for the duration of the truce in
proportion to the strength of the population and garrison. For this
purpose Paris to be allowed to receive the following live stock and
other provisions over four railway lines to be determined: 34,000
bullocks, 80,000 sheep, 8,000 pigs, 5,000 calves, 100,000 metric
centals of corned meat, 8,000,000 metric centals of hay or straw as
fodder for the cattle in question, 200,000 metric centals of flour,
30,000 metric centals of dried vegetables, 100,000 tons of coal, and
500,000 cubic metres of fire-wood. In these calculations the
population of Paris and its suburbs, including the garrison of 400,000
men, was estimated at 2,700,000 to 2,800,000 inhabitants.
These demands on the part of the French could not be accepted.
Had we agreed to them we should have surrendered the greater and
more important portion of the advantages we had gained in the last
seven weeks, at the cost of great sacrifices and severe exertions. In
other words, we should in the main have returned to the position in
which we were on the 19th of September, the day on which our
troops completed the investment of Paris. We are asked to allow
Paris to provision itself, when even now it suffers from scarcity and
will shortly be obliged to starve or surrender. We are to suspend our
military operations just at the moment when the fall of Metz and the
release of the army of Prince Frederick Charles enable us to extend
and render them more effective. We are quietly to permit recruiting
and organisation, by means of which the French Republic is to
create a new field force, while we require no recruits. At the same
time that we are to allow Paris and the other French fortresses to
supply themselves with provisions, we are to provide for our own
troops without the requisitions which are necessary in an enemy’s
country. We are to make all these concessions without any military
equivalent—such, for instance, as the evacuation of one or two of
the Paris forts in return for the liberty to provision the city—and
without being offered any clear prospect of peace. The first object of
the armistice according to the Thiers memorandum, namely, the
restoration of an orderly state of affairs by the lawful election of a
Constituent Assembly, is unquestionably more in the interest of the
French themselves than in ours; and, considering the constant
excitement maintained by the inflammatory proclamations of the
Provisional Government, it may possibly not be secured even under
a new administration. More orderly conditions could be brought
about even now without a truce if the present Government were
seriously disposed to work in that direction. It was absolutely
impossible on the German side to have anything to do with such
proposals. A different arrangement altogether was needful, and
therefore the Chancellor of the Confederation offered M. Thiers a
truce of twenty-five to twenty-eight days on the basis of the
maintenance of the military status quo, which would enable the
French to carry on the elections in peace, and to convoke the
Assembly thus constituted. This also was a concession on our part in
which the advantages were all on the French side. If, as Thiers
asserted, Paris was supplied with provisions and other necessaries
for several months, it is not easy to see why the Provisional
Government broke off the negotiations which, at the outside, would
have prevented the Parisians from making useless sorties. France,
on the other hand, would have had the great advantage of having a
line of demarcation drawn which would have arrested the advance of
the German forces, restricting the unopposed occupation of further
districts by our army that had been set free by the fall of Metz. In the
meantime Thiers refused this very acceptable offer, and maintained
that the provisioning of Paris was an indispensable condition for an
understanding, while he was not empowered to give any prospect of
a military equivalent for the same, such as the evacuation of one of
the Paris forts.
On coming in to dinner, the Chief mentioned that the Minister of
War is seriously ill. He feels very weak, and will scarcely be able to
rise from his bed for a fortnight. The Count afterwards made some
jokes about the water supplied to us for washing. “The inhabitants of
the local reservoir,” he said, “seem to have their seasons. First came
the scolopendria, which are particularly distasteful to me, ‘moving
their thousand limbs together’ (Schiller’s Diver). Then followed the
wood lice, which I cannot bear to touch, although they are perfectly
harmless. I’d sooner grasp a snake. Now the leeches have arrived. I
found quite a small specimen to-day, doubled up into a button. I tried
to induce him to deploy, but he declined—remained a button. I then
poured some well water over him, and he stretched out straight, long
and thin like a needle, and made off with himself.” The conversation
then turned on a variety of simple but nevertheless estimable
delicacies, such as fresh and salt herrings, new potatoes, spring
butter, &c. The Minister observed to Delbrück, who also approved of
those good things: “The sturgeon is a fish which is also to be found
here, but it is not appreciated as it ought to be. In Russia they
recognise its good qualities. It is often caught in the Elbe in the
Magdeburg district, but is only eaten by fishermen and poor people.”
He then explained its good points, and thus came to speak of
caviare, and treated of the several varieties with the knowledge of a
connoisseur.
“The fresh caviare which we now get in Berlin is very good,” he
said, “since it can be brought by rail from St. Petersburg in forty
hours. I have had it several times, and one of my principal
complaints against that fat Borck is that he intercepted forty pounds
of this caviare which I once sent to the King. I suspected something
of the kind, as the King made no mention of it, and did not send me
any present in return. Later on Perponcher or some one told me that
on dropping in to Borck’s room he saw there a barrel of caviare with
a spoon standing in it. That made me wild with him (Das hat mir sehr
verdrossen).”
The Chief remarked at dinner: “To-day, again, I noticed when it
snowed how many points of resemblance there are between the
Gauls and the Slavs. The same broad streets, with the houses
standing close together, the same low roofs, as in Russia. The only
thing wanting here is the green onion-shaped steeple. But, on the
other hand, the versts and kilometres, the arsheens and metres are
the same. And then the tendency to centralisation, the uniformity of
views of the whole population and the communistic trait in the
popular character.”
He then spoke of the wonderful “topsy turvy” world we live in
nowadays. “When one thinks that perhaps the Pope will shortly be
residing in a small town of Protestant Germany, that the Reichstag
may meet in Versailles, and the Corps Législatif in Cassel, that
Garibaldi has become a French general in spite of Mentana, and that
Papal Zouaves are fighting side by side with him!” He followed up
this train of ideas for some little time.
The Minister then remarked suddenly: “Metternich has also
written to me to-day. He wants me to allow Hoyos to enter Paris, in
order that he may bring away the Austrians. I replied that since the
25th of October they have had permission to come out, but that we
could allow no more people to enter, not even diplomats. We also
receive none in Versailles, but I would make an exception in his
favour. He will then perhaps again raise the Austrians’ claims
respecting the property of the old Bund in the German fortresses.”
On the subject of doctors, and the way in which nature
sometimes comes to its own assistance, the Chief related that he
was once with a shooting party for two days at the Duke of ——. “I
was thoroughly out of sorts. Even the two days’ shooting and fresh
air did me no good. On the third day I visited the Cuirassiers at
Brandenburg, who had received a new cup. I was to be the first one
to drink out of it, thus dedicating it, and then it was to go the round of
the table. It held nearly a bottle. I made my speech, however, drank
and set it down empty, to the great surprise of the officers, who had
but a poor opinion of mere quill-drivers. That was the result of my
Göttingen training. And strangely, or perhaps naturally enough, it set
me all right again. On another occasion, when I was shooting at
Letzlingen in the time of Frederick William IV. the guests were asked
to drink from an old puzzle goblet. It was a stag’s horn, which
contained about three-quarters of a bottle of wine, and was so made
that one could not bring it close to the lips, yet one was not allowed
to spill a drop. I took it and drank it off at a draught, although it was
very cold champagne, and not a single drop fell on my white
waistcoat. Everybody was immensely surprised; but I said, ‘Give me
another.’ The King, however, who evidently did not appreciate my
success, called out ‘No, no more.’ Such tricks were formerly an
indispensable part of the diplomat’s trade. They drank the weaker
vessels under the table, wormed all they wanted to know out of
them, made them agree to things which were contrary to their
instructions, or for which, at least, they had no authority. Then they
were compelled to put their signatures at once, and afterwards when
they got sober they could not imagine how they had done it.”
Bismarck-Bohlen, who seemed to be particularly communicative
to-day, told the following anecdote about the Chief. At Commercy a
woman came to him to complain that her husband, who had tried to
strike a hussar with a spade, had been arrested. “The Minister
listened to her very amiably, and when she had done he replied in
the kindliest manner possible, ‘Well, my good woman, you can be
quite sure that your husband’ (drawing a line round his neck with his
finger) ‘will be presently hanged.’”
Saturday, November 12th.—While we were at lunch the Chief
was out. He shortly afterwards passed through the dining-room into
the saloon, accompanied by a bearded officer in a Prussian uniform,
the Grand Duke of Baden.
In about ten minutes the Chief returned to table. He was very
angry and indignant, and said: “This is really too bad! No peace from
these Grand Dukes even at one’s meals. They will eventually force
their way into one’s bedroom. That must be put a stop to. It is not so
in Berlin. There the people who want something from me announce
their visits in writing, and I fix a suitable time for them to call. Why
should it not be the same here?”
After a while the Chief said to one of the attendants who was
waiting upon us, “Remember in future in such cases to say that I am
not at home. Whoever brings any visitor to me unannounced will be
put under arrest and sent off to Berlin;” and after eating a few
mouthfuls more, he went on: “As if it were anything of importance!
But merely curiosity and a desire to kill time. He shall see, however, I
will shortly pay him a surprise visit on some official matter, so that he
cannot send me away....”
The conversation then turned on Roon’s asthma, which
according to Lauer is now improving. His rage at the appearance of
the Grand Duke during the dinner hour still visibly affected the Chief,
who asked Lauer, “What should one drink with marena when in a
bad temper?” and on Lauer recommending something the name of
which I could not catch, the Minister continued: “It upsets my
digestion when anything exasperates me at meals; and here I have
had good reason to be angry. They think that one is only made for
their use.” Then addressing the servant again the Chief said: “Mind
you send away the red lackeys, and say that I am not at home.
Remember that! And you, Karl (to Bohlen), must take care that this is
done.”
The name of Arnim Boitzenburg, the former Minister, then came
up. The Chancellor said he had been his chief at Aix-la-Chapelle,
and he went on to describe him as “amiable, clever, but unstable and
incapable of persistent or energetic action. He was like an india-
rubber ball that bounces again and again, but each time with
diminishing force until at length it ceases to move. He first had an
opinion, then weakened it by arguing against it himself, and went on
criticising his own criticism, until at last there was nothing left and
nothing done.”
Delbrück praised the son-in-law (Harry Arnim) as being well-
informed and intelligent, though unsympathetic and unambitious.
This was confirmed by the Chief, who said: “Yes, he is a rocket in
which they forgot to put in the powder. He has, however, a good
head, but his reports are not the same on any two successive days
—often on the same day two thoroughly contradictory views. No
reliance can be placed upon him.”
Arnim’s lack of ambition led some one to speak of orders and
titles, and the Chief said his first decoration was a medal for saving
life, which he received for having rescued a servant from drowning. “I
was made an ‘Excellency’ at the palace in Königsberg in 1861. I
however, already had the title in Frankfurt, only there I was not a
Prussian but a Federal Excellency. The German Princes had decided
that each Minister to the Diet should have that title. For the matter of
that I did not trouble myself much about it—nor afterwards either—I
was a distinguished man without it.”
Sunday, November 13th.—The Chancellor, in a general’s uniform
and helmet, and wearing several orders, went to-day to dine with the
King. As he was leaving, Bohlen said to him: “But you ought to have
the ribbon of the Iron Cross in your button-hole.”
“It is there already,” replied the Minister. “In other circumstances I
should not wear it. I am ashamed before my own sons and many
others who have earned it but not got it, while all the loafers at
headquarters swagger about with it.”
In the evening the Chancellor desired me to send a démenti of a
false report published by the Augsburg Allgemeine Zeitung, to the
effect that Count Arnim paid a visit to headquarters before his
departure for Rome. The Chief at the same time remarked: “I have
told you more than once that you must not write so violently. Here
you are again, speaking of ‘hallucination’ (in correction of an article
by Archibald Forbes in the Daily News). Why not be civil? I, too,
have to be civil. Always this carping, malignant style! You must learn
to write differently if you want to work in such a distinguished Foreign
Office, or we must make other arrangements. And such a bullying
style! Just like Brass, who might have had a brilliant position if he
were not so brutal.” “Hallucination” was the word used by the
Minister himself; but in future I shall be careful to sift my phrases so
as to eliminate all rough words and only let soft ones find their way
into the press.
Hatzfeldt told me at tea that the Chief had also “carried on
awfully” with him, adding that if he remained in such a temper for
long he (Hatzfeldt) would think of leaving. The Count will, however, in
all probability, take plenty of time to reconsider this matter.
Tuesday, November 15th.—The Chief is still unwell. Theiss
reports that the Court have their things ready packed to-day, and this
is confirmed at lunch. The position of affairs between here and
Orleans is not as good as it might be. The Minister also on sitting
down to table mentions the possibility of our having to retire, and
evacuate Versailles for a time. There might be an attack from Dreux
combined with a sortie on a large scale from Paris. He had
repeatedly spoken of that possibility to members of the general staff.
Even a layman could see that a successful attempt of that kind in
which not only the Court and general staff but also the heavy siege
guns would be in danger of falling into the hands of the enemy, must
be the sole chance of relieving Paris, and that the French, therefore,
may well hazard the attempt.

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1) The confidence interval for a single coefficient in a multiple regression

a. makes little sense because the population parameter is unknown.

a. stays the same.

5) When testing joint hypothesis, you should

6) The overall regression F-statistic tests the null hypothesis that

a. all slope coefficients are zero.

7) For a single restriction (q = 1), the F-statistic

a. is the square root of the t-statistic.

a. by dividing the estimate by its standard error.

12) The homoskedasticity-only F-statistic is given by the following formula

a. safely assume that your regression results are significant.

a. use a two-sided alternative hypothesis to check the influence of all included

a. the sample values of these coefficients in 95% of randomly drawn samples.

a. only if an omitted determinant of Yi is a continuous variable.

a. dependent on you whim.

a. then this can be expected from sample variation.

Discuss how this formula can be understood intuitively.

n = 7,311.17 + 3,985.20 × Reputation – 0.20 × Size

+ 8,406.79 × Dpriv – 416.38 × Dlibart – 2,376.51 × Dreligion

R2=0.72, SER = 3,773.35

n = 5,450.35 + 3,538.84 × Reputation + 10,935.70 × Dpriv – 2,783.31 × Dreligion;

R2=0.72, SER = 3,792.68

n = 7,311.17 + 3,985.20 × Reputation – 0.20 × Size

+ 8,406.79 × Dpriv – 416.38 × Dlibart – 2,376.51 × Dreligion

R2=0.72, SER = 3,682.02

3) In the multiple regression model with two explanatory variables

∑ x12i ∑ x22i − (∑ x1i x2i )2

∑ yi x2i ∑ x12i − ∑ yi x1i ∑ x1i x2i

∑ Yi = 33.33; ∑ X1i = 2.025; ∑ X 2i = 17.313

4) A subsample from the Current Population Survey is taken, on weekly earnings of

n = 570.70 - 170.72 × Female, R2=0.084, SER = 282.12.

Summary of the Distribution of Winning Percentage, On Base plus

Average Standard Percentile

The results are as follows:

n = 0.94 – 0.100 × teamera , R2 = 0.49, SER = 0.06.

n = –0.68 + 1.513 × ops , R2=0.45, SER = 0.06.

Answer: The t-statistic is only normally distributed in large samples. As a result,

n = –229.92 – 6.52 × Female + 0.51 × Sibs+ 5.58 × Height,

R2=0.50, SER = 21.08

n = 0.339 – 12.894 × n + 1.397 × sK , R2=0.621, SER = 0.177

n = 0.046 – 5.869 × n + 0.738 × sK + 0.055 × Educ, R2=0.775, SER = 0.1377

How has the inclusion of Educ affected your previous results?

R2=0.416, SER = 6983

(a) Are the slope coefficients statistically significant?

9) The administration of your university/college is thinking about implementing a policy of

GenderComp=|(50%-% of Male Students at Table)|

n = 30.90 – 3.78 × Size – 8.81 × DCoed + 2.28 × DFemme +2.06 × DRoommate

(a) Indicate which of the coefficients are statistically significant.

Answer: AHEi = −2.44 − 1.57 × DFemme + 0.27 × DMarried + 0.59 × Educ