Dependent Random Variables - Simple Regression Model - Engineering Assignment Help

Assignment Task :

1.  Let X and Y be dependent random variables with finite variances. Define the residual U as the difference between the actual Y and the predicted value EY X (| ) , i.e., U Y EY X | ).Compute E U( )

3. Use the data in HTV.dta for this question. The data set includes information on wages, education, parents’ education, and several other variables for 1,230 working men in 1991.

i)  What percentage of men completed 12th grade but no higher grade? Do the men or their parents have, on average, higher levels of education?

ii) Estimate a simple regression model where a one-point increase in abil (a measure of cognitive ability) changeswage by a constant dollar amount. Use this model to find the predicted increase in wage for an increase in abil of one standard deviation. Does abil explain most of the variation in wage ?

iii)  Now, estimate a simple regression model where each one-point increase in abil has the same percentage effect on wage . If abil increases by one standard deviation, what is the approximate percentage increase in predicted wage ?

v) If person A has educ +15 and exper+ 9 and person B has educ +13 and exper+ 8 , use the estimated model in part iv) to find the residual for person A and the predicted difference in log( ) wage between B and A.

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