Explain the nature of auto correlation 

 

Suppose that a random sample of 200 twenty-year-old men is selected from a population and their heights and weights are recorded. A regression of weight on height is estimated as follows:

Weight 44.73+0.7Height, Square=0.81 SE (B0) = 0.97, SE (B1) = 0.58, SE denotes a standard error.

 

a)State the hypotheses 

 

b)Conduct the t-test 

 

c)Test whether not the estimated coefficient of " Height" is statistically significant at 5% significance level ( the critical value for the t- test at 5% significance level is 1.96. 

 

d)Interpret the results 

 

e)What does R squared = 0.81 mean? 

 

f)If a mean's Height is 180 cm, what is his estimated weight (weight is measured in kg?

Question two

Using an example illustrate the Omitted variable Bias ( 3mks)

Explain how you would remedy severe multicollinearity in your data (12mks)

Question three

With the aid of equations, explain the difference between a stochastic and a deterministic relationship

Explain the difference between cross-sectional data and time series data- Give examples of each (6mkd)

Using an example illustrate the dummy trap (5mks)