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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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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 Spring '08
 Staff
 Statistics, Econometrics, Least Squares, Normal Distribution, Regression Analysis, explanatory variables

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