SATA TECHNOLOGY AND BUSINESS COLLEGE
Distance Education Program
ASSIGNMENT FOR ECONOMETRICS FOR MANAGEMENT
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Assignment (30%)
1. Differentiate between a simple linear regression and a multiple linear regression
2. What are the Assumptions of Multiple Linear Regression?
3. What is Heteroscedasticity?
4. What is Multicollinearity and How can it Impact the Model?
5. How to Measure Multicollinearity?
6. Write two advantages of Multiple Linear Regression over Simple linear regression
modeling?
7. Suppose the data collected from sample observation on quantity supplied of banana (Yi) and
market price (Xi) from a randomly selected 12 farmers of the Arbaminch Zuria Wereda.
No 1 2 3 4 5 6 7 8 9 10 11 12
Yi(Quantity 69 76 52 56 57 77 58 55 67 53 72 64
supplied of
banana)
Xi(Price in 9 12 6 10 9 10 7 8 12 6 11 8
birr)
Based on above date answer the following questions by following necessary Step
a. Find the mean value of Yi and Xi
b. Estimate the simple regression line (coefficients for and the ’s.)
c. Calculate covariance between X and Y measures if X and Y. Is there negative or positive
relationship?
d. Calculate correlation coefficient between X and Y? Is there no, weak, moderate or strong
relationship between X and Y?
e. How much percent of the variation in the income of tour guides is explained by the model?
(Calculate R2 and interpret it)
f. Which estimates of and the ’s are significantly different from 0? Do the t-test for each
estimated coefficient t (show necessary Step).
g. Conduct the F-test to test the significance of the whole model. (Show necessary Step).
h. What is the expected quantity supplied of banana of a farmer with 12-birr, 10 birr and 9
birrs? (forecast)
i. Interpret coefficient and ’s?
8. Suppose the researcher want to analyses the factor that affects productivity of apple in
Chancha wereda. He collected data from sample observation on yields of apple (Yi) and
their determinants (Xi) (labour, fertilizer, land size, education) from a randomly selected 40
farmers of the Chancha Wereda.
They use Stata software to analyse the model. The Stata output is displayed in following
Figure
. reg lnproduction lneduc lnlab lnfert lnlsiz
Source SS df MS Number of obs = 40
F(4, 35) = 83.63
Model 3.10066365 4 .775165911 Prob > F = 0.0000
Residual .324431622 35 .009269475 R-squared = 0.9053
Adj R-squared = 0.8945
Total 3.42509527 39 .087822956 Root MSE = .09628
lnproduction Coef. Std. Err. t P>|t| [95% Conf. Interval]
lneduc .0223726 .0288006 0.78 0.442 -.0360957 .080841
lnlab .1841905 .0823683 2.24 0.032 .0169739 .351407
lnfert .18627 .0810739 2.30 0.028 .0216812 .3508587
lnlsiz .5365982 .0963161 5.57 0.000 .3410662 .7321302
_cons 1.003533 .419612 2.39 0.022 .1516754 1.855391
Based on the above result
a. Write regression equation?
b. How much the intercept of the model?
c. How much the slope of land size?
d. How much the degree of the freedom of the model?
e. How much the degree of the freedom of the residual?
f. How much mean sum square of the residual?
g. How much mean sum square of the model?
h. Which estimates of and the ’s are significantly different from 0? Do the t-test for
each estimated coefficient (show necessary Step).
i. Conduct the F-test to test the significance of the whole model. (Show necessary Step).
j. How much percent of the variation in the income of tour guides is explained by the model
(R2) and interpret it?
k. Interpret coefficient and ’s as elasticity or percentage change?
9. List commonly used binary dependent variable models?
10. What is the difference between linear regression and logistic regression?
11. What is a linear probability model (LPM)?
12. Write the limitations of the linear probability model (LPM)?
13. Differentiate logit and probit model
14. Assume that we want study the determinants of labor force participation (LFP) of adult men
in a particular town. Suppose that we have data for 30 observations on labor force
participation (employment), age and years of schooling. There are three regression results
a. Interpret the odds ratio
b. The Stata result given below is the marginal effect after logit of the above employment data.
Interpret marginal effect after logit
