Question #53 - Reading 2 Time-Series Analysis

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 26

Status: Unattempted

Shared Context

- The most appropriate interpretation from the foreclosure share regression equation model is: A) Multiple-R of the model is 0.75. B) Multiple-R of the model is 0.87. C) Variable STIM explains 37.5% of the variation in foreclosure share.

Question

Based on her regression results in Exhibit 2, using a 5% level of significance, Smith should conclude that:

Answer Choices:

A. stimulus packages do not have significant effects on foreclosure percentages, but housing crises do have significant effects on foreclosure percentages

B. both stimulus packages and housing crises have significant effects on foreclosure percentages

C. stimulus packages have significant effects on foreclosure percentages, but housing crises do not have significant effects on foreclosure percentages

Explanation

The appropriate test statistic for tests of significance on individual slope coefficient estimates is the t-statistic, which is provided in Exhibit 2 for each regression coefficient estimate. The reported t-statistic equals -2.10 for the STIM slope estimate and equals 2.35 for the CRISIS slope estimate. The critical t-statistic for the 5% significance level equals 2.12 (16 degrees of freedom, 5% level of significance). Therefore, the slope estimate for STIM is not statistically significant (the reported t- statistic, -2.10, is not large enough). In contrast, the slope estimate for CRISIS is statistically significant (the reported t-statistic, 2.35, exceeds the 5% significance level critical value).

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