Question

l wlu yuu gay RsGPA and ACl explain much of the variation in college grade point average. Use α=590 9. Using the data relating stock prices to GDP for the period 1970 to 1987, the following equation was estimated by OLS Y, -10.7849+0.0251x, t(11666) (7.4671) R-0.777 d 0.4618 a) Find out if there is first order autocorrelation in the model on the basis of the d statistic. Hint: Find the value of n, α-5% and check handout given in exam b) If there is use the d value to estimate the autocorrelation parameter tho (p) e) An econometric model is given and assuming that the enror terms follow the AR(I) scheme where the ur satisfy the OLS assumptions and ρ is bonn. Derive the Generalized least squares (GLS) in the two variables case Each part worth (5 pts) 10 Consider the following model Where ealthy equals consumption expenditure An estimation otthe

Answer 1

The following is the durbin watson table to find the critical values for the test

Durbin-Watson Statistic: 5 Per Cent Significance Points of dL and dU k 6 k 2 k 4 k 7 n dL dUdL dUdLdUdL d dL d dL dU dL dU d 6 0.610 1.400 ….. ….. ….. 7 0.700 1.356 0.467 1.896 - - 8 0.763 1.332 0.559 1.777 0.3672.287 - 9 0.824 1.320 0.629 1.699 0.455 2.128 0.296 2.588 10 0.879 1.320 0.697 1.64 0.525 2.016 0.376 2.414 0.243 2.822 -- 11 0.927 1.324 0.758 1.604 0.595 928 0.444 2.283 0.315 2.645 0.203 3.004 12 0.971 331 0.812 1.579 0.658 864 0.512 2.177 0.380 2.506 0.268 2.832 0.171 3.149 13 1.010 1.340 0.861 1.562 0.715 .816 0.574 2.094 0.444 2.390 0.328 2.692 0.230 2.985 0 14 1.045 1.350 0.905 1.551 0.767 779 0.632 2.030 0.505 2.296 0.389 2.572 0.286 2.848 0 15 1.077 .361 0.946 1.543 0.814 1.750 0.685 1.977 0.562 2.220 0.447 2.471 0.343 2.727 0 16 1.106 .371 0.982 1.539 0.857 .728 0.734 1.935 0.615 2.157 0.502 2.388 0.398 2.624 0 17 1.133 381 1.015 1.536 0.897 .710 0.779 1.900 0.664 2.104 0.554 2.318 0.451 2.537 0 18 1.158 .391 1.046 1.535 0.933 1.696 0.820 1872 0.710 2.060 0.603 2.258 0.502 2.461 0 19 1180 1 401 1074 1536 0 9671 685 859 1848 0757 7 023 0649 2 706 0549 396 0

Source: https://www3.nd.edu/~wevans1/econ30331/Durbin_Watson_tables.pdf

4) Fiom thu Dur bin Warbn table, ond dv cam be Co for n ( 1970 to 98 Tndsuision Zon< d 0 4618 (rien) amd accept H,:>o Thure s tve ausocorrelation

t- t phue u is u七 八よ 2 predisaly the auto correlation c efkient 2-2 2

e GLS i) for tst-1 → Multiplying (i ) by e (iu iii) → u satstes ous ausump tons, Hic equahois ths frea from autocorrelaion Yo 0.2309 β.