{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Homework 3 - Mehmet Soytas Wednesday Applied Econometrics I...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Mehmet Soytas Applied Econometrics I, Summer, 2009 Wednesday, May 27, 2009 (due: Wednesday, June 03, 2009) Homework Assignment 3 1. State whether the following statements are TRUE or FALSE (Provide an explanation in either case). a. When there are omitted variables in the regression, which are determinants of the dependent variable, then the OLS estimator is biased if the omitted variable is correlated with the included variable. b. Imagine you regressed earnings of individuals on a constant, a binary variable (°Male±) which takes on the value 1 for males and is 0 otherwise, and another binary variable (°Female±) which takes on the value 1 for females and is 0 otherwise. Because females typically earn less than males, you would expect the coe¢ cient for Male to have a positive sign, and for Female a negative sign. c. When you have an omitted variable problem, the assumption that E ( u i j X i ) = 0 is violated. This implies that the OLS estimator is no longer consistent. d. You have to worry about perfect multicollinearity in the multiple regression model because OLS estimates will be always upward biased. e. In the multiple regression model, the least squares estimator is derived by minimizing the sum of squared errors. f. One of the least squares assumptions in the multiple regression model is that you have random variables which are °i.i.d.±This stands for independently and identically distributed. g. Omitted variable bias will always be present as long as the regression R 2 < 1 : h. The following OLS assumption is most likely violated by omitted variables bias: E ( u i j X i ) = 0 : i. In the multiple regression model Y i = ° 0 + ° 1 X 1 i + ° 2 X 2 i + ° 3 X 3 i + u i
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern