In this exercise, you are to compare OLS and LAD estimates of the effects of 401(k) plan e...
In this exercise, you are to compare OLS and LAD estimates of the effects of 401(k) plan eligibility on net financial assets. The model is
(i) Use the data in 401KSUBS.RAW to estimate the equation by OLS and report the results in the usual form. Interpret the coefficient on e401k.
(ii) Use the OLS residuals to test for heteroskedasticity using the Breusch-Pagan test. Is u independent of the explanatory variables?
(iii) Estimate the equation by LAD and report the results in the same form as for OLS. Interpret the LAD estimate of β6.
(iv) Reconcile your findings from parts (i) and (iii).
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