In the probit model given in the following table the disturbance ui has this variance where f i is the standard normal density function evaluated at F1(Pi) a Given the preceding variance of ui, how would you transform the model in Table 15 10 to make the resulting error term homoscedastic i li F 1 ...

In the probit model given in the following table the disturbance ui has this variance: where f

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In the probit model given in the following table the disturbance ui has this variance:

Dependent Variable: I Coefficient Variable Std. Error Probability 1.0397E-07 4.8547E-08 t-Statistic 0.0572 0.00247 -1.01

P;(1 – P.) Nif? .2 r2

where f_i is the standard normal density function evaluated at Fˆ’1(Pi).

a. Given the preceding variance of ui, how would you transform the model in Table 15.10 to make the resulting error term homoscedastic?

i li = F^ˆ’1(PÌ‚_i)

0.20 €¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦. ˆ’0.8416

0.24€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦.€¦. ˆ’0.7063

0.30€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦.€¦. ˆ’0.5244

0.35€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦.. ˆ’0.3853

0.45€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦.. ˆ’0.1257

0.51€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦..€¦.. 0.0251

0.60€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦..€¦.. 0.2533

0.66€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦. 0.4125

0.75€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦.. ..0.6745

0.80€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦€¦ 0.8416

b. Use the data in Table 15.10 to show the transformed data.

c. Estimate the probit model based on the transformed data and compare the results with those based on the original data.

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Basic Econometrics

ISBN: 978-0073375779

5th edition

Authors: Damodar N. Gujrati, Dawn C. Porter

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Question Posted: May 29, 2018 03:09 AM

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In the probit model given in the following table the disturbance ui has this variance: where f

Question:

Dependent Variable: I Coefficient Variable Std. Error Probability 1.0397E-07 4.8547E-08 t-Statistic 0.0572 0.00247 -1.0166 0.04846 -17.7473 Income 19.5585 R? = 0.97951 Durbin-Watson statistic = 0.91384 P;(1 – P.) Nif? .2 r2

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a To make the error term homoscedastic the weight should be the inverse of ...View the full answer

Basic Econometrics

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