,ECS4863 Assignment 1 (ANSWER GUIDE) 2025 -
DUE 16 May 2025 QUESTIONS WITH 100%
VERIFIED AND CERTIFIED ANSWERS.
MULTIPLE CHOICE,ASSURED EXCELLENCE
Contents ;
QUESTION 1
Question 1.1: Omitted Variable Bias and Positive vs. Negative
Bias (4 marks)
Question 1.2: Testing Serial Correlation with Strictly Exogenous
Variables (3 marks)
Question 1.3: Heteroscedasticity and Implications for Inference
(4 marks)
Question 1.4: Definitions (4 marks)
Question 2: Time Series Data Analysis (5 marks)
1. Graph of the Data (Time Series Plot)
2. Stationarity Test (ADF Test)
Summary of Findings
Data Source Citation
Question 3: Time Series Model for South African Consumer
Prices
3.1 Calculating Annual Inflation & Exchange Rate Growth
, 3.2 Stationarity Tests (ADF) for LOIL, LEXCH, LEU_CPI
3.3 Cointegration Analysis
3.4 Error Correction Model (ECM) — Short-Run Dynamics
9Conclusion
References
Question 1: Econometric Theory (15 marks)
1.1 Omitted Variable Bias and Positive vs. Negative Bias (4
marks)
Omitted Variable Bias (OVB) occurs when a relevant
explanatory variable is left out of a regression model and
that variable is correlated with both the dependent
variable and one or more included regressors.
Positive Bias: The bias pushes the estimated coefficient
away from zero, overestimating the true effect.
Negative Bias: The bias pushes the estimated coefficient
towards zero or even negative, underestimating the true
effect.
Example: In a wage regression, omitting education can bias
the experience coefficient if education is correlated with
experience.
1.2 Testing for Serial Correlation with Strictly Exogenous
Variables (3 marks)
DUE 16 May 2025 QUESTIONS WITH 100%
VERIFIED AND CERTIFIED ANSWERS.
MULTIPLE CHOICE,ASSURED EXCELLENCE
Contents ;
QUESTION 1
Question 1.1: Omitted Variable Bias and Positive vs. Negative
Bias (4 marks)
Question 1.2: Testing Serial Correlation with Strictly Exogenous
Variables (3 marks)
Question 1.3: Heteroscedasticity and Implications for Inference
(4 marks)
Question 1.4: Definitions (4 marks)
Question 2: Time Series Data Analysis (5 marks)
1. Graph of the Data (Time Series Plot)
2. Stationarity Test (ADF Test)
Summary of Findings
Data Source Citation
Question 3: Time Series Model for South African Consumer
Prices
3.1 Calculating Annual Inflation & Exchange Rate Growth
, 3.2 Stationarity Tests (ADF) for LOIL, LEXCH, LEU_CPI
3.3 Cointegration Analysis
3.4 Error Correction Model (ECM) — Short-Run Dynamics
9Conclusion
References
Question 1: Econometric Theory (15 marks)
1.1 Omitted Variable Bias and Positive vs. Negative Bias (4
marks)
Omitted Variable Bias (OVB) occurs when a relevant
explanatory variable is left out of a regression model and
that variable is correlated with both the dependent
variable and one or more included regressors.
Positive Bias: The bias pushes the estimated coefficient
away from zero, overestimating the true effect.
Negative Bias: The bias pushes the estimated coefficient
towards zero or even negative, underestimating the true
effect.
Example: In a wage regression, omitting education can bias
the experience coefficient if education is correlated with
experience.
1.2 Testing for Serial Correlation with Strictly Exogenous
Variables (3 marks)
