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metricsexam1s06

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C LAVE U NICA : __________________ PLEASE DO NOT WRITE YOUR NAME . Applied Econometrics Midterm 16 th of March, 2006 This exam consists of ten short questions ( worth two points each ) and four long questions ( worth fifteen points each ) , for a total of 80 points. You have 80 minutes to answer all completely and clearly in the space provided. Short Questions 1. What does a p - value measure? 2. What is the difference between an M - estimator and a Z - estimator? 3. State the assumptions of the basic OLS model.

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4. What is unobserved heterogeneity? 5. The true relationship between y i and its two explanatory variables, x 2 i and x 3 i , is y i = 1 + 2 ! x 2 i " 2 ! x 3 i + e i . The variance in x 2 i is 1 ; the variance in x 3 i is 4 ; and their covariance is 0 . 5 . If you had no data on x 3 i and estimated the model y i = ! 1 + 2 " x 2 i + ! e i by OLS, including only x 2 i , what would you expect as the estimated value of ˆ 2
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