RMIT Classification: Trusted

ECON 1313: BASIC ECONOMETRICS

SEMESTER 2, 2021

Assessment 3 Empirical Team Project Report (40%)

Due: Week 12 on Thursday Sep 16, 2021 at 9:00 AM

INSTRUCTIONS: Please read this instruction carefully.

Your submission needs:
• To be submitted in in TII through Canvas
• Less than 3,500 words (excluding references, any Appendix and outcomes of Excel tables). The font
used should be Times New Roman 12pt. Include page numbers in either the footer or the header).
Please note that an Appendix contains information that is not essential to your report, but supports
your analysis and discussion1. If you put important information or discussion in an appendix, it will
not be marked.
• To be written on a separate Word document, to avoid a high similarity rate in TurnItIn.
• You need to submit Word file NOT PDF file. All texts with PDF format or images will not be
marked (excluding texts in graphs)
• Late work: Deduction of 10% of total marks of the assessment of each day being late.
• Penalty: deduct 5% assessed mark for each 100 over words. It is compulsory to specify the word
count on the cover page. Deduct additional 10% assessed mark for the report with no number of
word counts or providing incorrect numbers of word count on the cover page.
• The front page of the report should state: (i) Your name and student number; (ii) The lecturer’s
name; (iii) Your group number; (iv) Number of word counts
• Students need to submit both Word report and Excel calculation files.
• Any reports submitted 7 days after the due date will not be marked.
• Please note that RMIT treats plagiarism very strictly.

1
Appendices contain material that is too detailed to include in the main report, such as long
mathematical derivations or calculations, detailed technical drawings, tables of raw data or interim
analysis results.
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You must submit the below table completed with your agreed percentage of contribution for each group
member in your report after the cover page.

Group Members:

Student ID First name Parts Contribution % Signature

contributed

The marks will be allocated based on the contribution of each team member. For example, if the team
receives 25 marks and contribution of one member is 80%, then the mark of that team member will be
(80% of 25) 20 marks. Any issues in regard to this must be resolved before submission.

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Overview

This assessment task takes the form of a report, which your team will prepare as part of a consulting
research assignment. The assignment should be structured to include the 3 main sections detailed
below.

SECTION A: CROSS-SECTIONAL DATA ANALYIS

A multinational consulting firm has been approached by a client to do a consulting project on

understanding potential factors which influence firm performance in businesses of several countries
including Cambodia, India, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Thailand, Turkey,
Uzbekistan and Vietnam. The client expects to understand which are potential factors that influence on
firms’ performance in these countries.

Your team is assigned to do this project and required to submit a report. The project is to analyse the
determinants of firm performance for a particular country by using a reliable dataset.

Data of firms in a particular country was collected from World Bank in Enterprise Survey and is available
on World Bank website via the link:

https://www.enterprisesurveys.org/en/survey-datasets

Your team will work on data of ONE country which is assigned by your lecturer.

Link to download data and questionnaires of the surveys is found on Canvas.

PART 1A: Data collection and cleaning

Read the provided questionnaires in order to understand the information in the provided dataset. From
the provided dataset, your team will extract the data of the following variables for your analysis.
- Firm performance: Sales measuring by total annual sales for all products and services.
- Firm age: number of operating years (measuring by year of the survey subtracting year of
beginning operation)
- Firm size: number of all employees and managers
- Legal status dummy ( 1= if firm is Sole proprietorship, 0 = others)
- Experience: Working experiences of Top Manager (number of years of experience working in
this sector of Top Manager)
- Gender of Top Manager (1 = female, 0 = male)
- Product innovation dummy (1 = if firms have introduced new or significantly improved products
or services, 0 = No)

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In the data cleaning process, you may need recode the data in order to have variables which are
measured as indicated above. Explain the data collection and data cleaning process.

PART 2A: Descriptive statistics and relevant tests of checking OLS assumptions

1. Briefly discuss Descriptive statistics including Number of observations, Mean, Standard

deviation, Minimum and Maximum of the ALL variables above.
2. Take natural logarithm of variable Total annual sales for all products and services. Write a
population multiple linear regression of log(Sales) on Firm age, Firm size, Legal status,
Experience, Gender (Model 1).
3. Use a relevant method to check potential Multicollinearity of Model 1. Discuss the results of
this method. Discuss remedies (if necessary) you need to do in order to treat Multicollinearity.
4. Use relevant test to check Heteroskedasticity. Discuss the results of the test. Discuss potential
consequences of Heteroskedasticity. Discuss remedies (if necessary) you need to do in order
to treat Heteroskedasticity.

PART 3A: Discussion results

1. Estimate Model 1 using Ordinary Least Squares method and present your estimate results after
correcting for multicollinearity, heteroskedasticity (if necessary) in a table. Write your sample
multiple linear regression of Model 1. Interpret Goodness-of-Fit - R2.
2. Use two tailed t-test hypothesis and discuss results of each variable in Model 1. Interpret the
coefficients of all significant variables, using one of significant levels 1%, 5% and 10%.

PART 4A: Binary outcome variable approach

1. Engaging in product innovation is considered as one of important approaches for firms to

enhance their performance. Using binary outcome variable approach (Logit/ Probit) to estimate
the effects of Firm age, Firm size, Legal status, Experience and Gender on the likelihood that
firms introduce new or significantly improve products or services (Model 2). Present the results
of Model 2 in a table.

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2. Use two tailed t-test hypothesis and discuss results of each variable in Model 2. Interpret the
coefficients of all significant variables, using one of significant levels 1%, 5% and 10%.
3. Based on economic theories, do these results support what you have expected of the estimated
slope coefficients? Briefly explain.

PART 4A: Section A Conclusion

1. Summarize the main findings in your report (Section A) using non-technical language.
2. Based on your main findings (Section A), propose policy recommendations to potential
beneficiaries of your report.
3. Discuss limitations of your report and suggest what you can do to improve your estimations in
your above Models.

SECTION B: TIME SERIES DATA ANALYIS

The client in your project has known that a stock market listing is normally used to raise capital for long-
term business objectives such as market expansion or facilitating new production but this process is not
suitable for small businesses due to high time-consuming and costs. The client is interested in
understanding how fluctuations in Gold and Bitcoin prices and recent Covid 19 affect stock market
performance, especially in large stock markets.
Here are several top largest stock markets2 such as New York Stock Exchange, Japan Exchange
Group (Tokyo Stock Exchange), Shanghai Stock Exchange, Hong Kong Exchanges and Clearing, London
Stock Exchange, National Stock Exchange of India, TMX Group (Toronto), Deutsche Börse (German
Stock Exchange), Korea Exchange, Australian Securities Exchange and B3 - Brasil Bolsa Balcao.
Your team is assigned to analyse data in only ONE stock market. Your team will get the
information of assigned stock exchange market from your lecturer.
You need to collect daily data of Gold and Bitcoin prices and stock market index of an assigned
stock exchange market from Jan 01, 2021 to Aug 25, 2021. The data can be download from
https://in.finance.yahoo.com/. Or you can use data from other reliable sources.

2
https://www.globexmarkets.com/blog/articles/top-50-stock-exchanges.html

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The measurement of Covid 19 is captured by 2 variables including Total confirmed cases of

COVID-19 per 1,000,000 people in the country of your assigned stock market, and Total deaths attributed
to COVID-19 per 1,000,000 people in the country of your assigned stock market. This data is collected
from Our World in Data website or you can download it directly on Canvas.

PART 1B: Data collection and cleaning

Describe data collection and data cleaning process.

PART 2B: Descriptive statistics and relevant tests of checking OLS assumptions

1. Draw line charts over time of all variables including Gold price, Bitcoin price, Stock market
index, total_cases_per_million, and total_deaths_per_million. You can draw multiple line
charts in one figure. Discuss components of time series data and any features of interest in
these line charts.
2. Statistically describe variables such as Gold price, Bitcoin price, Stock market index,
total_cases_per_million, and total_deaths_per_million including Number of observations,
Mean, Standard deviation, Minimum and Maximum.
3. Calculate log-return of Gold, Bitcoin prices and Stock market index. The log-return of xt is
calculated by log(xt) - log(xt-1). Write a population multiple linear regression of log(return of
stock)t on log(return of Gold)t, log(return of Bitcoin)t and total_cases_per_milliont and
total_deaths_per_milliont (Model 3).
4. Use a relevant method to check potential Multicollinearity of Model 3. Discuss the results of
this method. Discuss remedies (if necessary) you need to do in order to treat multicollinearity.
5. Using relevant approach to check no Serial correlation assumption in Model 3. Discuss the
results of the test. Discuss potential consequences of serial correlation. Discuss remedies (if
necessary) you need to do in order to treat Serial correlation.

PART 3B: Discussion results

1. Estimate Model 3, present the result in a table and write a sample multiple linear regression
of Model (3) after correcting for multicollinearity and serial correlation. Interpret Goodness-
of-Fit - R2.

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2. Use two tailed t-test hypothesis and discuss results of each variable in Model 3. Interpret the
coefficients of all significant variables, using one of significant levels 1%, 5% and 10%.
3. Re-estimate Model (3) by adding a linear trend variable (Model 4). Develop hypothesis and
discuss result of t-test of ONLY variable linear trend in Model 4? Interpret the coefficient of
this variable if it is statistically significant.
4. Compare the estimation results in Model 3 and Model 4. Based on economic theories, do
these results support what you have expected of the estimated slope coefficients? Briefly
explain.

PART 4B: Section B Conclusion

1. Summarize the main findings in your report (Section B) using non-technical language.
2. Based on your main findings (Section B), propose policy recommendations to potential
beneficiaries of your report.
3. Discuss limitations of your report and suggest what you can do to improve your estimations in
your above Models.

SECTION C: INDUSTRIAL TALK (Max. 400 words)

Select at least 2 main points from the Industrial talk and discuss how these content might be relevant for
your future career or practices.

Provide the reference list of the resources you have used for

o Proper in-text, Harvard referencing is required.

o Full Harvard references must be provided.

- End of the Assessment -

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