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1  ECN 725
ECON 725
KEY FOR SAMPLE EXAM
S.C. AHN
2010 SPRING
Q1.
1) A
2) DNA.
If two random variables are normally distributed, then, zero correlation also means
stochastic independence.
3) A.
If X and Y are normal, the conditional mean of Y given X is linear in X:
Pr
(  )
oj y x
=
()
Eyx
.
4) DNA,
ˆ
minimizes SSE.
Thus,
UR
R
SSE
SSE
, where
UR
means “unrestricted” and
R
means “restricted.”
Thus,
22
1/
1
/
UR
UR
R
R
R
SSE
SST
SSE
SST
R
.
5) DNA.
ˆ
can be shown to be unbiased by the law of iterative expectation, as long as the
regressors are strictly exogenous.
6) DNA.
When
1
Tk
,
[(
1
)
/
]
R
kR
k
k
.
Thus,
2
0
R
if
2
/(
1)
Rk
k
.
7) DNA.
There are two possible reasons.
First, if you do two separate
t
tests with 5 % of
significance level, the type I error becomes more than 5%. Second, if the regressors
corresponding to
2
and
3
are highly correlated, the individual
t
tests are unreliable.
This is called multicollinearity problem.
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This note was uploaded on 11/19/2010 for the course ECON 270a taught by Professor Ahn during the Spring '10 term at ASU.
 Spring '10
 Ahn
 Econometrics

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