metricsexam1s07

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PPID: __________________ PLEASE DO NOT WRITE YOUR NAME . Applied Econometrics Midterm 5 th of March, 2007 This exam consists of ten short questions ( worth four points each ) and three long questions ( worth ten points each ) , for a total of 70 points. You have 50 minutes to answer all completely and clearly in the space provided. Short Questions 1. What is the difference between an M - estimator and a Z - estimator? 2. A researcher estimates the model y i = ! 1 + 2 x i + e i . His estimate of ˆ 2 is 2.073, with a standard error of 0.313. When he tests the hypothesis that 2 = 1 . 5 , he finds a p - value of 0.068. Based on this, he concludes, there is a 6.8 % chance that the true value of 2 equals 1.5, as hypothesized. Is this correct? Why or why not? 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
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