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    Quiz 1 Econ

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    Mahnoor
    This document contains a 3-question quiz on econometrics concepts. Question 1 involves interpreting regression coefficients from different functional forms relating family income to savings. Question 2 estimates a linear regression model relating SAT scores to hours spent in SAT preparation and calculates fitted values and residuals. Question 3 analyzes a regression of life expectancy on televisions per hundred people and interprets the coefficient and R-squared. Question 4 proves a formula for the variance of a linear combination of random variables.

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    Quiz 1 Econ

    Uploaded by

    Mahnoor
    67 views3 pages
    This document contains a 3-question quiz on econometrics concepts. Question 1 involves interpreting regression coefficients from different functional forms relating family income to savings. Question 2 estimates a linear regression model relating SAT scores to hours spent in SAT preparation and calculates fitted values and residuals. Question 3 analyzes a regression of life expectancy on televisions per hundred people and interprets the coefficient and R-squared. Question 4 proves a formula for the variance of a linear combination of random variables.

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    This document contains a 3-question quiz on econometrics concepts. Question 1 involves interpreting regression coefficients from different functional forms relating family income to savings. Question 2 estimates a linear regression model relating SAT scores to hours spent in SAT preparation and calculates fitted values and residuals. Question 3 analyzes a regression of life expectancy on televisions per hundred people and interprets the coefficient and R-squared. Question 4 proves a formula for the variance of a linear combination of random variables.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    67 views3 pages

    Quiz 1 Econ

    Uploaded by

    Mahnoor
    This document contains a 3-question quiz on econometrics concepts. Question 1 involves interpreting regression coefficients from different functional forms relating family income to savings. Question 2 estimates a linear regression model relating SAT scores to hours spent in SAT preparation and calculates fitted values and residuals. Question 3 analyzes a regression of life expectancy on televisions per hundred people and interprets the coefficient and R-squared. Question 4 proves a formula for the variance of a linear combination of random variables.

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    © All Rights Reserved
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    Download as pdf or txt
    of 3

    BSc-III

    Econometrics I (ECO 204)


    Quiz 1
    Spring 2021
    Azam Chaudhry Aimal Tanvir
    Name: _________________ Section: _______
    Total Marks: 100 marks
    Question 1 (30 marks):

    Using observations for 100 families on annual income and savings (both measured in dollars), the
    following equation is obtained:

    ̂ 𝐢 = −𝟏𝟓𝟓. 𝟎𝟗 + . 𝟐𝟖𝟗 𝐢𝐧𝐜𝐨𝐦𝐞𝐢


    𝐬𝐚𝐯𝐢𝐧𝐠 𝐄𝐪𝐮𝐚𝐭𝐢𝐨𝐧 (𝟏)

    a. Interpret the regression coefficient on income. (6 marks)

    Following are the estimated equations using alternative functional forms for this relationship:

    ̂ 𝐢 ) = −𝟎. 𝟓𝟒 + 𝟎. 𝟕𝟓𝟐 𝐢𝐧𝐜𝐨𝐦𝐞𝐢


    𝐥𝐧(𝐬𝐚𝐯𝐢𝐧𝐠 𝐄𝐪𝐮𝐚𝐭𝐢𝐨𝐧 (𝟐)

    ̂ 𝐢 = −𝟎. 𝟓𝟒 + 𝟎. 𝟕𝟓𝟐 𝐥𝐧 (𝐢𝐧𝐜𝐨𝐦𝐞𝐢 )


    𝐬𝐚𝐯𝐢𝐧𝐠 𝐄𝐪𝐮𝐚𝐭𝐢𝐨𝐧 (𝟑)

    ̂ 𝐢 ) = −𝟎. 𝟓𝟒 + 𝟎. 𝟕𝟓𝟐 𝐥𝐧 (𝐢𝐧𝐜𝐨𝐦𝐞𝐢 )


    𝐥𝐧 (𝐬𝐚𝐯𝐢𝐧𝐠 𝐄𝐪𝐮𝐚𝐭𝐢𝐨𝐧 (𝟒)

    b. Interpret the parameter on income (or log(income)) in each of the equations given above. (12
    marks)

    c. What is the predicted saving with an income of $5 with each of the models? (12 marks)

    Question 2 (40 marks):

    Suppose you are interested in estimating the effect of hours spent in an SAT preparation course
    (hours) on total SAT score (sat). The population is all college-bound high school seniors for a
    particular year. Suppose that you have randomly collected information on 6 students from the
    population on the number of hours they choose to spend in the preparation course and their SAT
    score.

    a. Write down the relevant population regression equation for the example above by making use
    of the variable names hours and sat. List at least two factors contained in the error term. Are
    these likely to have positive or negative correlation with hours? (8 marks)

    b. In the equation from part (a), what is the interpretation of 𝛽0 ? (4 marks)

    Page 1 of 3
    You have collected the following data from the students in the population:

    Student hours Sat

    1 18 1,090

    2 40 1,600

    3 10 1,020

    4 7 600

    5 29 1,490

    6 35 1,550

    c. Estimate the relationship between sat and hours using OLS; that is, obtain the intercept and
    slope estimates. (10 marks)

    d. Comment on the direction of the relationship. (4 marks)

    e. How much higher is the SAT score predicted to be if the number of hours increase by 16? (4
    marks)

    f. Compute the fitted values and residuals for each observation, and verify that the residuals
    (approximately) sum to zero. (10 marks)

    Question 3 (15 marks):

    Below are the results of a regression of life expectancy in years (lifeex) on number of televisions per
    hundred people (tv).

    a. Construct the estimated regression equation using the above table. (5 marks)

    b. Interpret the coefficient on tv. (5 marks)

    c. What is meant by the R-squared and why is it used? The value of the R-squared is 0.5370.
    Provide an interpretation for the R-squared. (5 marks)

    Page 2 of 3
    Question 4 (15 marks):

    Solve and prove that if Y = cV + dX, where c & d are constants, then:

    𝐯𝐚𝐫(𝒀) = 𝒄𝟐 𝑽𝒂𝒓(𝑽) + 𝒅𝟐 𝑽𝒂𝒓(𝑿) + 𝟐𝒄𝒅𝑪𝒐𝒗(𝑽, 𝑿)

    Page 3 of 3

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