44 - Chapter 3 Exercise Solutions Principles of...

Chapter 3, Exercise Solutions, Principles of Econometrics, 3e 44
Exercise 3.7 (continued)
(e) The two hypotheses are H
0
:
j
α = 0 versus H
1
:
j
α ≠ 0. The test statistic, given H
0
is true, is
( )
( )
118
~
se
j
j
a
t t
a
=
The rejection region is 1.980 t < − and 1.980 t > , where
(0.975,118)
1.980 t = .
The results for each company are given in the following table:
Stock t -value Decision rule
Disney
0.0010
0.152
0.0067
t
−
= = − Since 1.98 1.98 t − < < , fail to reject
0
H
GE
0.0059
1.199
0.0049
t = = Since
1.98 1.98 t − < <
, fail to reject
0
H
GM
0.0023
0.317
0.0073
t
−
= = −
Since 1.98 1.98