HW6 - i = β β 1 Ownprice i β 2 Subprice i ± i(1 2.a...

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Econ 444 Elementary Econometrics (Winter 2010) HOMEWORK EXERCISE: 6 Due in class on Wed, Mar 10 1. State with reasons whether the following statements are true or false. 1.a Even with autocorrelation the OLS estimators can be used for hypothesis testing since E ( ˆ β k ) = β k . 1.b If we know the form of heteroskedasticity ( meaning we know how error variance is related to one or more of the independent variables) then it is always better to use WLS than OLS. 2. Download hw6.xls from Carmen. The file contains time series data on Demand for Pepsi in US : Demand i - demand for pepsi in year i. Ownprice i - price of pepsi in year i. Subprice i - price of coke in year i. Now suppose you want to estimate, Demand
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Unformatted text preview: i = β + β 1 Ownprice i + β 2 Subprice i + ± i (1) 2.a Estimate (3) using Eviews. Submit your output. 2.b Using White’s test, test whether there is heteroskedasticity in (3) at 5% level of significance. Report your eviews output for this test and state clearly whether you find heteroskedasticity in the data. 2.c Estimate (3) using Eviews with White’s consistent standard errors. Sub-mit your output. 1 2.d One of the commonly used form for serial correlation is ± i = ρ± i-1 + u i (2) Interpret ρ in (4). 2.e Using output from part (a) carry out DW test test of positive serial cor-relation in (3) at 5% level of significance. 2...
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HW6 - i = β β 1 Ownprice i β 2 Subprice i ± i(1 2.a...

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