2009 Midterm Exam 1 - Midterm Exam 1 Econ 360 - Spring 2009...

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Midterm Exam 1 Econ 360 - Spring 2009 Professor Mumford Wednesday, February 25, 2009 mumford@purdue.edu RAWL 2077 3:00 – 4:15pm YOUR NAME: Answer all questions clearly and legibly. Show all of your work in the space provided. Do not use additional sheets or write on the back of the page. Do not refer to your notes, the text book, or any other materials during the exam. There are 100 points possible. Maximum points for each question are noted in parentheses. You have one hour and ten minutes to complete the exam. Good luck! 1. (12 points) Define or explain the following terms: a. (3 points) p-value b. (3 points) F-statistic c. (3 points) endogenous explanatory variable d. (3 points) explained sum of squares
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2. (18 Points) Variance-Covariance Matrix and Normality a. (6 points) In the multiple regression model, derive the variance-covariance matrix of the OLS estimator under E.1 - E.4. Indicate the role of assumption E.4 (Homoskedasticity and No Serial Correlation). b. (4 points) State assumption E.5 (Normality) c. (4 points) Under E.1 - E.5, what is the distribution of ˆ β ? d. (4 points) Without assumption E.5, when are t-statistics valid? Explain why.
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3. (14 points) The STATA output below is from a regression of y on x . For each part, write a formula that can be used to calculate the circled value. You can write the formulas in either summation or matrix notation. a. (2 points) b. (2 points) c. (2 points) d. (2 points) e. (2 points) f. (2 points) g. (2 points)
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y = β 0 + β 1 x 1 + β 2 x 2 + u which satisfies assumptions E.1, E.2, and E.3. Suppose that our primary interest is in β 1 , the partial effect of x 1 on y . We do not have data for x 2 which makes it impossible to estimate the population model. Instead we regress y on x 1 obtaining: ˜ y = ˜ β 0 + ˜ β 1 x 1 . a. (6 points) Derive the bias in ˜ β 1 . b. (4 points) Under what conditions is the bias equal to zero?
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This note was uploaded on 02/06/2012 for the course ECON 360 taught by Professor Na during the Spring '10 term at Purdue University-West Lafayette.

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2009 Midterm Exam 1 - Midterm Exam 1 Econ 360 - Spring 2009...

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