507 Final Exam
If first-order autocorrelation is present in a regression model, the following equation - ✔✔ correct
answer E. all of the above
Which of the follow is/are true concerning heteroscedasticity? - ✔✔ correct answer E. all of the
above
A distributed lag model is a regression equation that: - ✔✔ correct answer C. uses time-series data
and contains both the current values of an explanatory variable and the past period value(s) of this
variable on the right side of the equation
To minimize specification error, the research should: - ✔✔ correct answer A. find a proxy variable
that has a strong relationship to the actual explanatory variable
The most problematic issue that Logit analysis overcomes with respect to the Linear Probability
Model is that, in LPM: - ✔✔ correct answer C. there is no way to guarantee that the predicted value
of the dependent variable will be between 0 and 1
Causes of Autocorrelation - ✔✔ correct answer Incorrect specification of form of a relationship (eg -
non-linear),
Omission of variable or misspecification,
Measurement error in the dependent variable, and
Variables move smoothly over time
Hypothesis testing with the Durbin Watson statistic - ✔✔ correct answer DW statistic between 0 and
lower range, reject the null of no autocorrelation and make correction. DW between upper limit and
2, do not reject the null of no autocorrelation and make no correction. Between upper and lower you
cannot reach a conclusion
Range of Durbin Watson statistic - ✔✔ correct answer 0 to 4. 0 is perfect positive serial correlation
and 4 is perfect negative serial autocorrelation
Structure of the auxiliary regression for White's test for a given regression equation - ✔✔ correct
answer carry out auxiliary regression in which the squared residuals form the main regression are
regressed on all the independent variables, the squared independent variables, and all cross-
products of the independent variables
, 507 Final Exam
How Cochran-Orcutt procedure estimates rho - ✔✔ correct answer uses GLS approximations in an
iterative process to converge on a reliable estimate of rho for first-order serially correlated
disturbances; minimizing sum of squared residuals (RSS) for different values of rho until stable value
for RSS is obtained.
How simultaneous equation bias originates - ✔✔ correct answer Two equations have related error
terms, which violates the classic linear model assumption of the independent variables being fixed or
uncorrelated with the error term.
What were the main conclusions reached by Rubin in the article on wage determination mechanisms
in urban labor markets? - ✔✔ correct answer E. Estimation results do not support the existence of an
inverse relationship between unemployment and wage inflation. There is existence of wage variation
in urban labor markets, which is independent of national effects
Purpose served by the concordance/discordance results from a Logit regression - ✔✔ correct answer
Takes number of 0's in observations and multiplies by number of 1's in observation. concordance-
more 1's than 0's, discordance- no difference between 1 and 0. Percentage of pairs. less than 50% is
bad, 70 is okay, 80 is good.
Concept and use of an instrumental variable - ✔✔ correct answer Used as proxy in two stage least
squares to correct for simultaneous equation bias because it is correlated with an endogenous
variable, but not directly with outcome or error term to correct for endogenous variable (whose
values are explained or determined by the model)
Interpretation of parameter estimate from Logitech regression - ✔✔ correct answer The slope
parameter beta 2 is the change in the log of the odds of Y occurring given a unit change in X, holding
the effects of the other independent variables constant.
Interpretation of Odds Ratio from Logit regression - ✔✔ correct answer "A one unit increase in X
yields a predicted increase of # times of the odds ratio, holding the effect of the other independent
variables constant"
characteristics of Logit model - ✔✔ correct answer Probability of the event occurring represented by
Y actually occurring is always between 0 and 1. Relationships between Xs and Y is nonlinear: as x gets
small, p get close to 0. As x gets big, p approaches 1.
Use and characteristics of two stage least squares (TSLS) - ✔✔ correct answer Technique for systems
of simultaneous equations, consistent estimate of structural parameter estimates, replaces
If first-order autocorrelation is present in a regression model, the following equation - ✔✔ correct
answer E. all of the above
Which of the follow is/are true concerning heteroscedasticity? - ✔✔ correct answer E. all of the
above
A distributed lag model is a regression equation that: - ✔✔ correct answer C. uses time-series data
and contains both the current values of an explanatory variable and the past period value(s) of this
variable on the right side of the equation
To minimize specification error, the research should: - ✔✔ correct answer A. find a proxy variable
that has a strong relationship to the actual explanatory variable
The most problematic issue that Logit analysis overcomes with respect to the Linear Probability
Model is that, in LPM: - ✔✔ correct answer C. there is no way to guarantee that the predicted value
of the dependent variable will be between 0 and 1
Causes of Autocorrelation - ✔✔ correct answer Incorrect specification of form of a relationship (eg -
non-linear),
Omission of variable or misspecification,
Measurement error in the dependent variable, and
Variables move smoothly over time
Hypothesis testing with the Durbin Watson statistic - ✔✔ correct answer DW statistic between 0 and
lower range, reject the null of no autocorrelation and make correction. DW between upper limit and
2, do not reject the null of no autocorrelation and make no correction. Between upper and lower you
cannot reach a conclusion
Range of Durbin Watson statistic - ✔✔ correct answer 0 to 4. 0 is perfect positive serial correlation
and 4 is perfect negative serial autocorrelation
Structure of the auxiliary regression for White's test for a given regression equation - ✔✔ correct
answer carry out auxiliary regression in which the squared residuals form the main regression are
regressed on all the independent variables, the squared independent variables, and all cross-
products of the independent variables
, 507 Final Exam
How Cochran-Orcutt procedure estimates rho - ✔✔ correct answer uses GLS approximations in an
iterative process to converge on a reliable estimate of rho for first-order serially correlated
disturbances; minimizing sum of squared residuals (RSS) for different values of rho until stable value
for RSS is obtained.
How simultaneous equation bias originates - ✔✔ correct answer Two equations have related error
terms, which violates the classic linear model assumption of the independent variables being fixed or
uncorrelated with the error term.
What were the main conclusions reached by Rubin in the article on wage determination mechanisms
in urban labor markets? - ✔✔ correct answer E. Estimation results do not support the existence of an
inverse relationship between unemployment and wage inflation. There is existence of wage variation
in urban labor markets, which is independent of national effects
Purpose served by the concordance/discordance results from a Logit regression - ✔✔ correct answer
Takes number of 0's in observations and multiplies by number of 1's in observation. concordance-
more 1's than 0's, discordance- no difference between 1 and 0. Percentage of pairs. less than 50% is
bad, 70 is okay, 80 is good.
Concept and use of an instrumental variable - ✔✔ correct answer Used as proxy in two stage least
squares to correct for simultaneous equation bias because it is correlated with an endogenous
variable, but not directly with outcome or error term to correct for endogenous variable (whose
values are explained or determined by the model)
Interpretation of parameter estimate from Logitech regression - ✔✔ correct answer The slope
parameter beta 2 is the change in the log of the odds of Y occurring given a unit change in X, holding
the effects of the other independent variables constant.
Interpretation of Odds Ratio from Logit regression - ✔✔ correct answer "A one unit increase in X
yields a predicted increase of # times of the odds ratio, holding the effect of the other independent
variables constant"
characteristics of Logit model - ✔✔ correct answer Probability of the event occurring represented by
Y actually occurring is always between 0 and 1. Relationships between Xs and Y is nonlinear: as x gets
small, p get close to 0. As x gets big, p approaches 1.
Use and characteristics of two stage least squares (TSLS) - ✔✔ correct answer Technique for systems
of simultaneous equations, consistent estimate of structural parameter estimates, replaces
