APPLIED ECONOMIC ANALYSIS

Assignment- 1

The data file "Auction Price" contains data on auction prices of antique clocks, the age of the clocks, and the number of bidders.

Estimate the following regression and comment on the values of the coefficients:

Price_i = β₁ + β₂Age_i + β₃ N_i + u_i

Where Nis the number of bidders.

Comment on the signs and values of the coefficients.

Comment on whether Age and N individually influence the auction price.

What does the R² represent?

What does the R‾² represent?

Test the overall significance of the regression.

2. Using the data from "Starting Pay" to answer the following questions:

(a) Run the following regression:

ASP_i= β₁ + β₂ GPA_i +β₃ GMAT_i +β₄ EMP_i + β₅Tuition_i + β₆Rating_i + β₇Accept_i + u_i

(b) Comment on the meaning of the values of the coefficients.

(c) Comment on whether each explanatory variable explains average starting pay.

(d) Comment on the presence of multicollinearity.

(e) Comment on the problems encountered, if any, with multicollinearity.

(f) Would you expect the ASP regression function to suffer from heteroscedasticity?

(g) Apply a diagnostic test to determine if the function does suffer from multicollinearity heteroscedasticity.

If it does, perform a remedial measure to correct for heteroscedasticity.

Use the data in the file "Stock Price Index" to answer the following questions:

Run the regression and comment on the estimate of the coefficient.

Graph the residuals and comment on evidence of autocorrelation.

Perform a Durbin-Watson test for autocorrelation.

If you have evidence of autocorrelation, what problem does this present?

If you have evidence of autocorrelation, use a remedial measure to correct for it.

Attachment:- Data.rar