Assignment on econometrics
Due date: on final exam
Use personal telegram to submit the document
1. Derive the variance of the OLS estimator for an intercept ( ˆ0 ) of a simple linear regression.
2. A regression model is specified as Yi = βXi + εi, where ε and X satisfy all of the assumptions
of the classical linear regression model. The following estimator has been proposed:
Y
̂
X
Note that if Yi = βXi + εi, then Y X .
a. Prove that this estimator is unbiased and consistent.
b. What steps would you take to determine whether or not the estimator is efficient? You do not
have to actually determine whether or not it is efficient. Just outline the procedure you would
follow.
3. Coach has come up with a new estimator for the linear model: y = Xβ + μ. His estimator is
1
coach’s estimator for ˆ 1 where ̂ is the usual OLS estimator, n = sample size (the
n
number of observations) and 1 is a “k by 1” vector of ones (and ̂ is a “k by 1” vector).
a. Is his estimator (given the usual assumptions) unbiased? Prove it.
b. Is his estimator (given the usual assumptions) consistent? Prove it.
4. A researcher is using data for a sample of 32 companies to investigate the relationship
between annual spending Yi (measured in millions of dollars per year) and annual firm profits Xi
(measured in millions of dollars per year). Preliminary analysis of the sample data produces the
following sample information:
N N N
Yi 4,917.8, X i 11,856.1 , Y
2
N = 32 , i 4,022,814.0
i 1 i 1 i 1
N N N
X i 25,796,522.5 , X iYi 9,785,312.0, x y
2
i i 7,963,252.0
i 1 i 1 i 1
N N N
yi 3,267,040.6 , xi 21,403,801.0 , uˆ
2 2 2
i 304,324.7
i 1 i 1 i 1
where xi X i X , yi Yi Y uˆ i Yi Yˆi Yi ˆ0 ˆ1 X i for i = 1, ..., N. Use the
above sample information to answer all the following questions. Show explicitly all
formulas and calculations.
(a) Use the above information to compute OLS estimates of the intercept coefficient β 0 and
the slope coefficient β1.
(b) Interpret the slope coefficient estimate you calculated in part (a) -- i.e., explain what the
numeric value you calculated for ̂ 1 means.
(c) Compute the value of R2, the coefficient of determination for the estimated OLS
sample regression equation. Briefly explain what the calculated value of R 2 means.
N
(d) What is the value of X uˆ
i 1
i i for the estimated sample regression equation? Explain
briefly how you obtained your answer.
(e) Calculate the estimated variance of ̂ 1 .
(f) Perform a test of the null hypothesis H0: β1= 0 against the alternative hypothesis H1: β1 ≠ 0 at
the 5% significance level (i.e., for significance level α = 0.05). State the decision rule you use,
and the inference you would draw from the test. Would you draw the same inference if you
performed the test at the 1% significance level (i.e., for significance level α = 0.01)?
(g) Compute the two-sided 95% confidence interval for the slope coefficient β 1.
(h) Perform a test of the proposition that β1 > 0.30 at the 5% significance level (i.e., for
significance level α = 0.05). State the null and alternative hypotheses, and show how you
calculated the test statistic. State the decision rule you use, and the inference you would draw
from the test. Would you draw the same inference if you performed the test at the 1%
significance level (i.e., for significance level α = 0.01)?
