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Unformatted text preview: Econ 166 Spring 2007 Joseph Altonji Page 1 of 3 Due Tuesday February 13, in class. Problem Set #2 (Problems 1 and 2 are based on Berndt, Chapter 2) Problem 1 In this exercise you will do an event study of the Conoco takeover &ght in 1981. Dupont was the successful bidder, and Dow was the unsuccessful bidder. There are data in the &le eventcon.dta from 197685 on returns for Dupont and Dow and on the market and riskfree returns. There are data on returns for Conoco only through September 1981 because this is when the takeover was completed. 1. Using as long a time period as possible, estimate the constant term & and slope para meter ¡ of CAPM model for the three companies involved in the Conoco takeover. Use these estimates to construct average residuals for the months of June, July, August, and September 1981. What are the signs of these residuals? How do you interpret them? (STATA hint: You can use the predict command to compute residuals.) 2. Construct a dummy variable that equals one during the period from June to September 1981 and zero otherwise. Reestimate the CAPM model for each &rm including this dummy variable as an additional regressor. Are these coe¡cients signi&cantly di¢erentdummy variable as an additional regressor....
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 Spring '07
 JosephAltonji
 Econometrics, Linear Regression, Regression Analysis, CAPM model, Joseph Altonji Page, Joseph Altonji

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