This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Homework 8 8.11 a. 2 t = 1 + 2 S t + 3 D t + 4 S 2 t + 5 ( S t D t ). Note that D 2 t is not used here because it is a dummy variable. b. 2 = 3 = 4 = 5 = 0. c. Regress P t against a constant, S t , and D t and obtain u t = P t 1 2 S t 3 D t . Next regress u 2 t against a constant, S t , D t , S 2 t and ( S t D t ). d. Compute LM = nR 2 , where n is the number of observations and R 2 is the unadjusted R 2 from the second regression in Step c. Under the null hypothesis of homoscedas ticity, LM has the 2 distribution with 4 d.f. e. The critical value of 2 4 for a 5% level is 9.48773. Reject the null if LM > 9 . 48773. f. From the auxiliary regression compute 2 t = 1 + 2 S t + 3 D t + 4 S 2 t + 5 ( S t D t ). Next compute the weight as w t = 1 / q 2 t . Finally, regress w t P t against w t , w t S t and w t D t , without a constant term. 8.12 a. H : 2 = 3 = 0. H 1 : At least one of them is not zero. b. (1) Regress E t against a constant and Y t , (2) compute the residuals u t = E t 1 2 Y t , and (3) regress u 2 t against a constant, P t and P 2 t ....
View Full
Document
 Summer '07
 Rashidian
 Econometrics

Click to edit the document details