2. a) Compare and contrast the Durbin-Watson (DW) d-statistic test with the Lagrange Multiplier (LM) approach to test for serial correlation in time series models. [50 marks] b) We try to explore the relationship between the cost per student and related factors at four-year colleges in the U.S., covering the period 1987 to 2011. We run a OLS regression using Stata, and the results are as below: - reg lnte ftestu ftgrad tt ga cf where Intc is the logarithm total cost per student, ftestu is the number of full time equivalent students, ftgrad is the number of full-time graduate students, tt is the number of tenure track faculty per 100 students, GA is the number of graduate assistants per 100 students, and CF is the number of contract faculty per 100 students, which are hired on a year to year basis. (i) Write down the regression model. [10 marks] (ii) If we consider university 'identity' as a factor that could affect average cost per student, how should we adjust the estimation? Write down the new model and explain the differences with the model in point (i). BUSI4528-E1 [25 marks] Turn Over (iii) What is the F-test used for? Comment the F-test result for the above Model. 4 -1 (iii) What is the F-test used for? Comment the F-test result for the above model. [15 marks]