As an example of impure serial correlation caused by an incorrect functional form, lets return to the

Question:

As an example of impure serial correlation caused by an incorrect functional form, let€™s return to the equation for the percentage of putts made (P_i) as a function of the length of the putt in feet (Li) that we discussed originally in Exercise 3 in Chapter 1. The complete documentation of that equation is

P, = 83.6 – 4.1L, (0.4) t = - 10.6 R? = .861 N = 19 DW = 0.48

a. Test Equation 9.32 for serial correlation using the Durbin€“Watson test at the 5-percent level.

b. Why might the linear functional form be inappropriate for this study? Explain your answer.

c. If we now reestimate Equation 9.32 using a double-log functional form, we obtain:

ÎnP = 5.50 – 0.921NL; (0.07) t = - 13.0 N = 19 R? = .903 DW = 1.22

Test Equation 9.33 for serial correlation using the Durbin€“Watson test at the 5-percent level.

d. Compare Equations 9.32 and 9.33. Which equation do you prefer? Why?

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Using Econometrics A Practical Guide

ISBN: 978-0134182742

7th edition

Authors: A. H. Studenmund

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Question Posted: Mar 19, 2018 04:22 AM

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As an example of impure serial correlation caused by an incorrect functional form, lets return to the

Question:

P, = 83.6 – 4.1L, (0.4) t = - 10.6 R? = .861 N = 19 DW = 0.48 ÎnP = 5.50 – 0.921NL; (0.07) t = - 13.0 N = 19 R? = .903 DW = 1.22

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a With a 5 percent onesided test and N 19 K 1 the critical values are d L 118 and d U 140 Since d ...View the full answer

Using Econometrics A Practical Guide

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