220B_mid07

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

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–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
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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.

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