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HW2 Questions OCT-18-10 - EF5070 Econometrics Homework...

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EF5070 October 18, 2010 Econometrics Homework Assignment 2 Due on or before Oct 30, 2010 6:30pm ( Thur. &Sat. sessions ) Each question carries 25 points. 1. Which of the following can cause the usual OLS t statistics to be invalid (that is, not to have t distributions under 0 H )? Explain. (i) Heteroskedasticity. (ii) A sample correlation coefficient of 0.95 between two independent variables that are in the model. (iii) Omitting an important explanatory variable. [source: Problem 4.2 (p. 159) Wooldridge (2009).] 2. In a study relating college grade point average (GPA) to time spent in various activities, you distribute a survey to several students. The students are asked how many hours they spend each week in four activities: studying, sleeping, working, and leisure. Any activity is put into one of the four categories, so that for each student, the sum of hours in the four activities must be 168. (i) In the model i u leisure work sleep sutdy GPA + + + + + = 4 3 2 1 0 β β β β β does it make sense to hold sleep , work , and leisure fixed, while changing study ?
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