Question #97 - Reading 1 Multiple Regression

Reading: Reading 1 Multiple Regression

PDF File: Reading 1 Multiple Regression.pdf

Page: 47

Status: Unattempted

Shared Context

- Suppose the Breusch-Godfrey statistic is 3.22. At a 5% level of significance, which of the following is the most accurate conclusion regarding the presence of serial correlation (at two lags) in the residuals? A) No, because the BG statistic is less than the critical test statistic of 3.55, we don't have evidence of serial correlation. B) Yes, because the BG statistic exceeds the critical test statistic of 3.16, there is evidence of serial correlation. C) No, because the BG statistic is less than the critical test statistic of 3.49, we don't have evidence of serial correlation.

Question

Gloucester subsequently revises the model to exclude the small cap index and finds that the revised model has a RSS of 106.332. Which of the following statements is most accurate? At a 5% level of significance, the test statistic:

Answer Choices:

A. of 13.39 indicates that we cannot reject the hypothesis that the coefficient of small- cap index is significantly different from 0

B. of 1.30 indicates that we cannot reject the hypothesis that the coefficient of small- cap index is not significantly different from 0

C. of 4.35 indicates that we cannot reject the hypothesis that the coefficient of small- cap index is significantly different from 0

Explanation

SSER = SST – RSSR = 164.9963 – 106.3320 = 58.6643 F = [(SSER – SSEU) / q] / [SSEU / (n – k – 1)] = [(58.6643 – 54.8395) / 1] / (54.8395 / 20) = 3.8248 / 2.742 = 1.30 Critical F(1, 20) = 4.35 (from Exhibit 1) Since the test statistic is not greater than the critical value, we cannot reject the null hypothesis that b2 = 0.

Actions

Practice Flashcards