Econometrics Test 3
False. FEEDBACK: If the Breusch-Pagan Test for heteroskedasticity results in a large p-value, the null hypothesis of heteroskedasticty is rejected.
(True / False) If the Breusch-Pagan Test for heteroskedasticity results in a large p-value, the null hypothesis of homoskedasticty is rejected.
True FEEDBACK: If the p-value of an F statistic 2.63 is 0.034, then we can say that the problem of interest is significant at the 5% level.
(True / False) If the p-value of an F statistic 2.63 is 0.034, then we can say that the problem of interest is significant at the 5% level.
True. FEEDBACK: The multiple linear regression model with a binary dependent variable is called the linear probability model.
(True / False) The multiple linear regression model with a binary dependent variable is called the linear probability model.
False. FEEDBACK: The population R-squared is unaffected when heteroskedasticity is present in Var(u|x1, ..., xk).
(True / False) The population R-squared is affected when heteroskedasticity is present in Var(u|x_1, ..., x_k).
True. Multicollinearity among the independent variables in a linear regression model causes the heteroskedasticity-robust standard errors to be large.
(True / False) Multicollinearity among the independent variables in a linear regression model causes the heteroskedasticity-robust standard errors to be large.
True. The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.
(True / False) The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.
FALSE. A dummy variable trap arises when too many dummy variables describe a given number of groups.
(True / False) A dummy variable trap arises when a single dummy variable describes a given number of groups.
Dummy. FEEDBACK: A dummy variable or binary variable is used to incorporate qualitative information in a regression model.
A _____ variable is used to incorporate qualitative information in a regression model.
the functional form of the regression model is misspecified
A test for heteroskedasticty can be significant if _____.
y indicates whether an adult is a college dropout. The dependent variable, y is binary if it is used to indicate a qualitative outcome.
Consider the following regression equation: y = β_0+ β_1x_1+ ...+ βk x_k + u In which of the following cases, the dependent variable is binary?
Var(u_i|x_i) = i^2. If the first four Gauss-Markov assumptions hold and the error term contains heteroskedasticity, then Var(u_i|x_i) = i^2
Consider the following regression model: yi = β_0 + β_1x_i + u_i. If the first four Gauss-Markov assumptions hold true, and the error term contains heteroskedasticity, then _____.
the predicted change in the probability of success when x1 increases by one unit, everything else remaining constant. FEEDBACK: A binary dependent variable is used when a regression model is used to explain a qualitative event. The dependent variable takes a value of 1 when the event takes place (success) and it takes a value of zero when the event does not take place. The coefficient of an independent variable in this case measures the predicted change in the probability of success when the independent variable increases by one unit.
In the following regression equation, y is a binary variable: y = β_0+β_1x_1+...β_k x_k+ u In this case, the estimated slope coefficient for x1, measures _____.
educated people have higher savings than those who are not educated. The coefficient δ_0 measures the impact of education on an individual's annual savings. If it has a positive impact, as in this case, educated people should have higher savings.
The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β_0 + δ_0 Edu + β_1Inc + u The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual. Refer to the above model. If δ_0 > 0, _____.
dummy variable trap FEEDBACK: The inclusion of another dummy variable in this model would introduce perfect collinearity and lead to a dummy variable trap.
The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β_0 + δ_0 Edu + β_1Inc + u The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual. Refer to the model above. The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated, will give rise to the problem of _____.
t = (Estimate - Hypothesized Value) / SE
The general form of the t statistic is _____.
inverse of the conditional variance of u_i given x_i. FEEDBACK: The generalized least square (GLS) is an efficient procedure that weights each squared residual by the inverse of the conditional variance of u_i given x_i.
The generalized least square (GLS) is an efficient procedure that weights each squared residual by the:
4. Rationale: FEEDBACK: If a regression model is to have different intercepts for, say, g groups or categories, we need to include g -1 dummy variables in the model along with an intercept. In this case, the regression equation should include 5-1=4 dummy variables since there are 5 ethnic groups.
The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively. If there are 5 ethnic groups in Budopia, how many dummy variables should be included in the regression equation for income determination in Budopia?
heteroskedasticity-robust standard error
The square root of the quantity \widehat{VAR}(\hatβ_j) = (Summation(\hat{r}^2_i_j * \hat{u}^2_i_j)) / SSR_j^2 is called the _____ for .
The functional form of the error variances is known. FEEDBACK: Weighted Least Squares estimation is used only when the functional form of the error variances is known.
Weighted least squares estimation is used only when _____.
It is only valid under homoskedasticty.
Which of the following is true of F test?
A dependent variable can be binary. FEEDBACK: A dependent variable is binary if it has a qualitative meaning.
Which of the following is true of dependent variables?
The Ordinary Least Square estimators are not the best linear unbiased estimators if heteroskedasticity is present. FEEDBACK: The Ordinary Least Square estimators are no longer the best linear unbiased estimators if heteroskedasticity is present in a regression model.
Which of the following is true of heteroskedasticity?
The White test assumes that the square of the error term in a regression model is uncorrelated with all the independent variables, their squares and cross products.
Which of the following is true of the White test?
The WLS method fails if \hat{h}_i is negative or zero for any observation.
Which of the following is true?
The model can produce predicted probabilities that are less than zero and greater than one.
Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?