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Consider the regression equation below that is based on the relationship between orange juice price and the weather. The dependent variable is the percentage change
Consider the regression equation below that is based on the relationship between orange juice price and the weather. The dependent variable is the percentage change in the price over that month. FDD, is the number of freezing degree days during that month. The regression equation includes lagged values of FDD, over the previous 6 months. %ChgP. = - 0.65 + 0.47 FDD, + 0.14FDD, -1 + 0.06FDD;-2 + 0.07 FDD;-3 + 0.03FDD, -4 + 0.05 FDD;-5 +0.05FDD (0.23) (0.14) (0.08) (0.06) (0.05) (0.03) (0.03) (0.04) t-6 Suppose that you added FDD,+ 1 as an additional regressor. If FDD is strictly exogenous, would you expect the coefficient on FDD , to be zero or nonzero? O A. Zero. O B. Nonzero. O C. The exact value will be zero or nonzero with equal probability (1/2). O D. There is insufficient information to determine the answer. Would your answer change if FDD is exogenous but not strictly exogenous? O A. Yes, FDD,+ , will not enter the regression with a nonzero coefficient. O B. No, FDD,4 , may enter the regression with a nonzero coefficient O C. Yes, FDD,+ 1 may enter the regression with a nonzero coefficient. O D. No, FDD,+ , will not enter the regression with a nonzero coefficient
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