HW3(1) - Econ 4010 Introduction to Econometrics(Spring 2016...

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Econ 4010: Introduction to Econometrics (Spring 2016) http://blackboard.uc.edu/ Homework 3 Due: Thursday March 17 Olivier Parent ( [email protected] ) Assignment 1. The following table contains the ACT scores and the GPA (grade point average) for eight MA student. Grade point average is based on a four- based scale and has been rounded to one digit after the decimal. Student GPA ACT 1 2.8 21 2 3.4 24 3 3.0 26 4 3.5 27 5 3.6 29 6 3.0 25 7 2.7 25 8 3.7 30 (a) Estimate the relationship between GPA and ACT using OLS; that is, obtain the intercept and the slope estimates in the following regression: GPA i = β 0 + β 1 ACT i + u i , where i = 1 , . . . , 8 and u is the error term. Suppose the estimates you have obtained are significantly different from 0. Comment on the direction of the relationship. How much
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higher is the GPA predicted to be if the ACT score is increased by five points? (b) Compute the fitted values and residuals for each observation, and verify that the residuals (approximately) sum to zero.
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