220B_mid07 - 1 Econ 220B, Winter 2007 James Hamilton...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
–1– Econ 220B, Winter 2007 James Hamilton Midterm Exam DIRECTIONS: No books or notes of any kind are allowed. Answer all questions on separate paper. 150 points are possible on this exam. 1.) (15 points) Comment very brie f y on the following statement. “Economists are fond of making assumptions but loathe to test them. A prime example arises in the least squares regression, y t = x 0 t β + ε t , in which a key assumption is that ε t is uncorrelated with x t . Although many economists make this assumption, it is rare to F nd anyone actually trying to test it by calculating the correlation between the least-squares residual e t and the regressors x t to see if it is indeed small. This failure to test a key assumption is an example of economists’ pig-headedness.” 2.) (15 points) Brie f y describe what you see as the connection (if any) between the Gauss-Markov Theorem and Generalized Least Squares. 3.) Suppose y t = x 0 t β + ε t T 1 T X t =1 x t x 0 t p Q ( Q has full rank k ) E ( ε 2 t )= σ 2 E ( ε 2 t x t x 0 t )= S ( S has full rank
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/02/2012 for the course ECON 220b taught by Professor Hamilton,j during the Spring '08 term at UCSD.

Ask a homework question - tutors are online