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Homework1 - Mehmet Soytas Wednesday Applied Econometrics I...

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Mehmet Soytas Applied Econometrics I, Summer, 2009 Wednesday, May 13, 2009 (due: Monday, May 18, 2009) Homework Assignment 1 1. Show that the °rst least squares assumption , E ( u i j X i ) = 0 , implies that E ( Y i j X i ) = ° 0 + ° 1 X i . 2. Write down the expressions for the R 2 for the regression of Y on X and then X on Y . Compare them. 3. Go to the web address http://wps.aw.com/aw_stock_ie_2/50/13016/3332253.cw/index.html. Down- load the data "California Test Score Data Used in Chapters 4-9". ° Replicate the regression result we saw in the lecture. Basically run a regression of testscr on str ° Calculate the e/ect of reducing str by 2 on the test score by using the predicted regression result. ° Conduct a hypothesis test on the coe¢ cient ^ ° 0 where the null hypothesis is; H 0 : ^ ° 0 = 690 ° Conduct a hypothesis test on the coe¢ cient ^ ° 1 where the null hypothesis is; H 0 : ^ ° 1 = 0 ° Construct %95 and %99 con°dence intervals for this hypothesis. Comment. ° Conduct a hypothesis test on the coe¢ cient ^ ° 1 where the null hypothesis is; H 0 : ^ ° 1 = ± 2 : 0 °
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