Empirical_HW4.docx - C2 Use the data in LAWSCH85 for this...

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C2. Use the data in LAWSCH85 for this exercise. i. Using the same model as in Problem 4 in Chapter 3 , state and test the null hypothesis that the rank of law schools has no ceteris paribus effect on median starting salary. a. H 0 : β 5 = 0 ii. Are features of the incoming class of students—namely, LSAT and GPA —individually or jointly significant for explaining salary ? (Be sure to account for missing data on LSAT and GPA .) a. Jointly significant for explaining salary iii. Test whether the size of the entering class ( clsize ) or the size of the faculty ( faculty ) needs to be added to this equation; carry out a single test. (Be careful to account for missing data on clsize and faculty .) a. F = 2.72 b. F distribution is 5.18 c. Therefore, the size of the entering class (clsize) and the size of the faculty (faculty ) is not jointly significant at 5% level iv. What factors might influence the rank of the law school that are not included in the salary regression? a. The north, south, east, west may influence the rank of the law school C8. The data set 401KSUBS contains information on net financial wealth ( nettfa ), age of the survey respondent ( age ), annual family income ( inc ), family size ( fsize ), and participation in certain pension plans for people in the United States. The wealth and income variables are both recorded in thousands of dollars. For this question, use only the data for single-person households (so fsize = 1 ). i. How many single-person households are there in the data set? a. 2,017 ii. Use OLS to estimate the model and report the results using the usual format. Be sure to use only the single-person households in the sample. Interpret the slope coefficients. Are there any surprises in the slope estimates? a. Nettfa = -43.04 + 0.80inc + 0.84age b. No surprises really, as annual income increase by $1000 we predict net financial assets will increase by $800. And as age increase by 1 year net financial assets go up by $840. As you get older and your income goes up
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