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2. Consider the following model for Bitcoin return equation: | BTC = Bo + BTSX - BAGSPC + Aut where BTCt, TSX+, GSPC are the
2. Consider the following model for Bitcoin return equation: | BTC = Bo + BTSX - BAGSPC + Aut where BTCt, TSX+, GSPC are the monthly return of Bitcoin, the TSX index, and S&P500 index, respectively. (a) (10 marks) We suspect that the model suffers from omitted variable bias because we have no data on consumer sentiment. Write down the proce- dure of Hausman test using the lagged variables TSX+-1 and GSPCt-1 as instruments for the two endogenous variables (TSX and GPC). (b) (5 marks) Is this model over-identified or just identified? Write down the procedure for J test if we have four instruments using the first two lags: TSXt-1, TSXt-2, GSPCt-1 and GSPCt-2 2. Consider the following model for Bitcoin return equation: | BTC = Bo + BTSX - BAGSPC + Aut where BTCt, TSX+, GSPC are the monthly return of Bitcoin, the TSX index, and S&P500 index, respectively. (a) (10 marks) We suspect that the model suffers from omitted variable bias because we have no data on consumer sentiment. Write down the proce- dure of Hausman test using the lagged variables TSX+-1 and GSPCt-1 as instruments for the two endogenous variables (TSX and GPC). (b) (5 marks) Is this model over-identified or just identified? Write down the procedure for J test if we have four instruments using the first two lags: TSXt-1, TSXt-2, GSPCt-1 and GSPCt-2
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