solution3 - Solutions to PS 3 Hongyan Zhao Oct 15, 2009 Q1...

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Solutions to PS 3 * Hongyan Zhao Oct 15, 2009 Q1 (a) We reproduce the analysis described in the website and got the similar results (I also uploaded the Matlab code to bspace). * If you find any mistake or typo, please email me hyzhao@econ.berkeley.edu 1
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(b) The correlation matrix among 10 questions is: Q2 (a) The line didn’t fit the data well. From the graph, we can see that the errors variance are not constant. It violates the conditions that OLS estimator is BLUE. We can use White-test to test whether there are heteroskedasticity. (b) Using the fitted line, as age increases, earnings increases. But from the graph, we don’t see the case. Instead, earnings increase with the age and hit a peak, then it decreases. If the earnings of people under age 20 is zero (not the missing value), then the residuals are just the negative of the fitted value. It is very big and impossible to satisfy the mean zero conditions. (c) We can use non-linear regression function such as including square term into it.
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This note was uploaded on 02/17/2010 for the course ECON 141 taught by Professor Staff during the Fall '08 term at University of California, Berkeley.

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solution3 - Solutions to PS 3 Hongyan Zhao Oct 15, 2009 Q1...

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