EC315 Final Study Guide

EC315 Final Study Guide - PART III SPECIFIC KNOWLEDGE...

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PART III SPECIFIC KNOWLEDGE SHORT-ANSWER QUESTIONS. Problem 7 Define Autocorrelation in the following terms: a. In what type of regression is it likely to occur?  Regressions involving time series data  b. What is bad about autocorrelation in a regression? The standard error of the estimates will high. c. What method is used to determine if it exists? (Think of statistical test to be used)  Durbin Watson Statistic is used determine auto correlation in a regression. d. If found in a regression how is it eliminated?  Appropriate transformations can be adopted to eliminate auto correlation.  Problem 8 Define Multicollinearity in the following terms:  a) In what type of regression is it likely to occur?  Multicollinearity occurs in multiple regressions when two or more independent variables are highly  correlated.  b) Why is multicollinearity in a regression a difficulty to be resolved?  Multicollinearity in Regression Models 
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EC315 Final Study Guide - PART III SPECIFIC KNOWLEDGE...

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