31.29064 Frah. 11279) SECTION A - Answer all FIVE (5) questions. Write your answers, scan them and sobrait on MyLo . Each question is worth 20 marks. Total marks = 106, Question 1 neplet Youde RESID Sample: 1984Q0 2001Q1 You have obtained quarterly data from the ARS for Tasmania from September 1984 to March hiciudal observetors, 93 200% for the following variables: Varbible Fal. Ciror EMP, the pursher of craplayed persons in thousands EMP, AWE, the average weekly camings in S per week, 1.973582 GSP, the Gross State Product GSP. 2714 TIME. a time tread increasing by I per quarter. #4 15294 6 595645 You have the following Of.S regression results in Table 1 from Views. RESIDI-7 DOMSEL 0.412:79 Men do called was 15TH-14 0.379785 Table 1 S.D. dspenders var 12 79675 2.519648 Make! Law Squares Sample TWO! 105101 Leg Whelheed -351.1519 Itemmar. Quira alien, Durbin Wilson 10 leciudad dinersathens: 93 Sed Four 275,46 1:95 0.0302 Prob LOGIST 276.14 4. 12 TIME 0.$1 Ton Mitisca C -1793.18 221 25 -17 14 Ted andvol values: R-squared Adjusted R-aquired SD. dependent var Sam squared aodd 15393.15 Schwam citron #.11 7420 unssided y values. Lay Much heed 4.053329 Text Equation 7687 147 Duribar-Wetion val Dependent Variable: DRESIT Method Least Squares Sample (adjisan: 158401 2008qL a. Carefully interpret the coefficients of LOG(GSP) and TIME in Table I. Vaciato (3 marks] RESIDI-1 0.072351 h. Do you think there is any problems with these estimated results? If so why? -0.31 4789 15 marks) 6.209053 SD. dependent var 1004473 S H. of regression 3.903418 Akalike inle ctirana 1.228041 7421.953 Schwarz erlicrian 7255113 C. The residuals from the estimation in Table ] are saved as RESID and the following results Ing ikedawud 358.7187 Bena-Culan criker. 1.238985 in Table 2 obtained. Name and conduct the appropriate test and explain its importance? Durhis.Watson its! 1.$80941 [S marks] d. The residuals from the estimation in Table I are saved as RESID and the following resultSECTION A - Answer all FIVE (5) questions. Write your answers, scan them and submit F-statistic 31.28066 Prob. F(2,89) 0.0000 Obs*R-squared 39.21400 Prob. Chi-Square(2) 0.0000 on MyLo . Each question is worth 20 marks. Total marks - 100. Test Equation: Question 1 t Variable: RESID Method: Least Squares Sample: 198403 200801 You have obtained quarterly data from the ABS for Tasmania from September 1984 to March Included observations: 95 2008 for the following variables: Presample missing value lagged residuals set to zero. Variable Coefficient Sid. Error t-Statistic Prob. EMP, the number of employed persons in thousands EMP, AWE, the average weekly earnings in S per week, LOG(EMP) 1.975582 54.25813 0.036411 0.9710 LOG(GSP) -10.63432 28.64929 -0.371190 0.7114 GSP, the Gross State Product GSP, TIME 0.133210 0.283205 0.47036 0.6392 TIME, a time trend increasing by 1 per quarter. C 68.19294 173.0642 0.394033 0.6945 RESID(-1) 0.692756 0.105677 6.555440 0.0000 You have the following OLS regression results in Table 1 from EViews. RESID(-2) -0.076501 0. 106904 0.71560 0.476 R-squared 0.412779 Mean dependent var -7.34E-14 Adjusted R-squared 0.379789 S.D. dependent var 12.79675 Table 1 S.E. of regression 10.07789 e info criterion 7.519640 Dependent Variable: AWE Sum squared resid 9039.179 Schwarz criterion .680937 Method: Least Squares Log likelihood 351.1829 Hannan-Quinn criter. 7.584816 Sample: 1984Q3 2008Q1 F-statistic 12.51226 Durbin-Watson stat 1.778661 Included observations: 95 Prob(F-statistic) 0.000000 Variable Coefficient Std. Error 1-Statistic Prob. Table 3 LOG(EMP) 275.4 69.81 3.95 0.0002 -Statistic Prob.* LOG(GSP) 226.14 36.93 6.12 0.0000 TIME 0.91 0.36 2.50 0.014 Test statistic 4.969332 0.0000 C -2783.18 221.2: -12.58 0.0000 Test critical values: 1% level 2.589795 5% level -1.944286 R-squared 0.988755 Mean dependent var 525.5368 10% level -1.614487 Adjusted R-squared 0.988385 S.D. dependent var 120.6777 S.E. of regression 13.00598 Akaike info criterion 8.009888 * one-sided p-values. Sum squared resid 15393.15 Schwarz criterion 8.117420 Log likelihood -376.4697 Hannan-Quinn criter. 8.053339 Test Equation F-statistic 2667.247 Durbin-Watson stat 0.610187 Dependent Variable: D(RESIDJ Prob(F-statistic) 0.00000 Method: Least Squares Sample (adjusted): 198404 2008Q1 Included observations: 94 after adjustments Variable Coefficient Std. Error 1-Statistic Prob a. Carefully interpret the coefficients of LOG(GSP) and TIME in Table 1. [5 marks] RESID(-1) 0.359435 0.072331 -4.969332 0.0000 Do you think there is any problems with these estimated results? If so why? R-squared 0.209033 Mean dependent var -0.314789 b. [5 marks] Adjusted R-squared 0.209033 S.D. dependent var 10.04473 S.E. of regression 3.933418 Akaike info criterion 7.228057 Sum squared resid 7421.955 Schwarz criterion 7.255113 The residuals from the estimation in Table I are saved as RESID and the following results Log likelihood 338.7187 Hannan-Quinn criter. 7.238985 C. in Table 2 obtained. Name and conduct the appropriate test and explain its importance? Durbin-Watson stat 1.880961 [5 marks] d. The residuals from the estimation in Table I are saved as RESID and the following results in Table 3 obtained. Name the appropriate test and explain its importance? [5 marks]Many time series used in finance are described as non-stationary series. a. What do we mean by non-stationary? Why is it important to test for non-stationarity and account for it in estimation? [4 marks] b. Three forms of standard Dickey-Fuller test are given below: A. Ayt = Pyt-1 + ut B. Aye = atpyt-1 + ut C. Aye = a + Bt + pyt-1 + ut Which of these forms would you use to test for non-stationarity in each of the following variables and why? i. Stock prices ii. Stock returns iii. The residuals of an Engle-Granger test (2+2+2=6 marks] c. Consider the following data generating process for a series yt: y, = #+1.5 y, +u, What most accurately describes the process for y? How would you work with this model for yt ? [4 marks] d. What difficulties can arise when applying and interpreting Dickey-Fuller tests? Describe in detail another test which could be applied to test for non-stationarity. [3+3 = 6 marks]