ECON2271 - Introductory Econometrics Assignment

Assignment Task

1. (a) Plot the above-described data (or scattergram) using the vertical y-axis for Gross Revenue and the horizontal x-axis for Total Assets.

(b) Sketch a regression or linear trend line through the scattergram.

(c) What broad conclusion(s) can you draw from your results?

2. (a) Present the Eviews regression outcome for the following model.

Ŷ_i = ß₁ +  ß₂X_i + ü_i

where

Ŷ_i: Gross Revenue

X_i: Total Assets

(b) Provide brief comments on the estimate of ß₂.

(c) Is ß₂ BLUE? Explain briefly and concisely.

3. (a) Two indicators could be used to assess the goodness of fit of the model in Question 2. Describe these indicators

(b) Provide comments on the goodness of fit of the model in Question 2 if possible

4. (a) Given the estimation results in Question 2, test the null hypothesis that the true value of ß₂ is -0.50 at the 1% level of significance

(b) In order to perform the test in Question 4(a), what assumption(s) do you have to make?

5. (a) Apart from the method you choose to complete Question 4(a), what other method(s) could be used to conduct the same test in Question 4(a)? Describe these “other method(s)” briefly and precisely. (NB: You could just describe the testing procedures/steps etc. Detailed numerical calculation is not required).

(b) Do you have to make any assumption in order to answer Question 5(a)? Do you expect to obtain the same decision as in Question 4(a)? Why?

6. (a) Given the estimation results in Question 2, test the null hypothesis that the true value of ß₂ is zero at the 5% level of significance

(b) What is the probability of committing a type-I error for conducting this test?

(c) What is the exact probability of committing a type-I error?

7. Apart from the method you choose to complete Question 6(a), what “other method(s)” could be used to conduct the same test in Question 6(a)? Apply these “other method(s)” to test the same hypothesis in Question 6(a).

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