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# Hw3 - G regory Smith Dr Cuellar Econ Problem Set#3 1 Using...

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Gregory Smith 9/29/2009 Dr. Cuellar – Econ Problem Set #3 1. Using data set CEOSAL2.dta estimate the regression: Salary = β 0 + β 1 ceoten + u. (i) . reg salary ceoten Source | SS df MS Number of obs = 177 -------------+------------------------------ F( 1, 175) = 3.65 Model | 1241694.06 1 1241694.06 Prob > F = 0.0577 Residual | 59524270.7 175 340138.69 R-squared = 0.0204 -------------+------------------------------ Adj R-squared = 0.0148 Total | 60765964.7 176 345261.163 Root MSE = 583.21 ------------------------------------------------------------------------------ salary | Coef. Std. Err. t P> |t | [95% Conf. Interval] -------------+---------------------------------------------------------------- ceoten | 11.74613 6.14774 1.91 0.058 -.387127 23.87939 _cons | 772.4263 65.67567 11.76 0.000 642.8079 902.0446 ------------------------------------------------------------------------------ . predict salaryhat (option xb assumed; fitted values) . display 772.4263+( 11.74613*10) 889.8876 . display 772.4263+( 11.74613*10) 889.8876 for 10 years at the company (ii) . gen MEM=invttail(175, .05/2)*SEM . su MEM if ceoten==10 Variable | Obs Mean Std. Dev. Min Max

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0 1000 2000 3000 4000 5000 0 10 20 30 40 years as ceo with company 1990 compensation, \$1000s Fitted values UCIM LCIM ------------+-------------------------------------------------------- MEM | 8 90.00574 0 90.00574 90.00574 The lower bound is 889.8876 - 90.00574 = 799.8818 The upper bound is 889.8876 + 90.00574 = 979.8933 We are 95% confident that a CEO with 10 years of experience will make between 799.8818 and 979.8933. (iii) . gen UCIM = salaryhat+MEM . gen LCIM = salaryhat-MEM . scatter salary salaryhat UCIM LCIM ceoten, c(. l l l) s(oh i i i)
MEI            8    1154.552           0   1154.552   1154.552                                                                                                                                                 Variable          Obs        Mean    Std. Dev.       Min        Max . su MEI if  ceoten==10 . gen LCII =  salaryhat-MEI . gen UCII =  salaryhat+MEI . gen MEI=invttail(175, .05/2)*SEI . predict SEI, stdf (iv) . display 889.8876+ 1154.552 2044.4396 . display 889.8876- 1154.552 -264.6644 We are 95% confident that an individual CEO with 10 years of experience will have a salary between -264.6644 and 2044.4396.

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0 1000 2000 3000 4000 5000 0 10 20 30 40 years as ceo with company 1990 compensation, \$1000s Fitted values UCII LCII (v) . scatter salary salaryhat UCII LCII ceoten, c(. l l l) s(oh i i i) (vi). predict SEI, stdf . gen MEI=invttail(175, .05/2)*SEI . gen UCII = salaryhat+MEI . gen LCII = salaryhat-MEI . su MEI if ceoten==20 Variable | Obs Mean Std. Dev. Min Max -------------+-------------------------------------------------------- MEI | 4 1163.501 0 1163.501 1163.501 . display 772.4263+( 11.74613*20)
37          1207.033        362.8774        844.1556        1569.911        34          1171.795        327.6423        844.1523        1499.437        28          1101.318        258.1435        843.1743        1359.461        26          1077.826         235.421        842.4047        1313.247        24          1054.333        213.0393        841.2941        1267.373        22          1030.841        191.1182        839.7228        1221.959        21          1019.095         180.383        838.7119        1199.478        20          1007.349        169.8362        837.5127        1177.185        19          995.6027        159.5151        836.0876        1155.118        18          983.8566        149.4664        834.3901        1133.323

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