Use the data in ECONMATH to answer this question. (i) Logically, what are the smallest and largest
Question:
Use the data in ECONMATH to answer this question.
(i) Logically, what are the smallest and largest values that can be taken on by the variable score? What are the smallest and largest values in the sample?
(ii) Consider the linear model
score = β0 + β1colgpa + β2actmth + β3acteng + u.
Why cannot Assumption MLR.6 hold for the error term u? What consequences does this have for using the usual t statistic to test H0: β3 = 0?
(iii) Estimate the model from part (ii) and obtain the t statistic and associated p-value for testing H0: β3 = 0. How would you defend your findings to someone who makes the following statement: “You cannot trust that p-value because clearly the error term in the equation cannot have a normal distribution?”
Step by Step Answer:
Introductory Econometrics A Modern Approach
ISBN: 9781337558860
7th Edition
Authors: Jeffrey Wooldridge