返回列表 发帖

Reading 12: Multiple Regression and Issues in Regression A

Q6. An analyst is trying to determine whether fund return performance is persistent. The analyst divides funds into three groups based on whether their return performance was in the top third (group 1), middle third (group 2), or bottom third (group 3) during the previous year. The manager then creates the following equation: R = a + b1D1 + b2D2 + b3D3 + ε, where R is return premium on the fund (the return minus the return on the S& 500 benchmark) and Di is equal to 1 if the fund is in group i. Assuming no other information, this equation will suffer from:

A)   heteroskedasticity.

B)   serial correlation.

C)   collinearity.

Q7. Suppose the analyst wants to add a dummy variable for whether a person has an undergraduate college degree and a graduate degree.  What is the correct representation if a person has both degrees?

              Undergraduate Degree  Graduate Degree

              Dummy Variable      Dummy Variable

A)                        1                     1

B)                        0                     0

C)                        0                     1

Q8. The amount of the State of Florida’s total revenue that is allocated to the education budget is believed to be dependent upon the total revenue for the year and the political party that controls the state legislature. Which of the following regression models is most appropriate for capturing the effect of the political party on the education budget? Assume Yt is the amount of the education budget for Florida in year t, X is Florida’s total revenue in year t, and Dt = {1 if the legislature has a Democratic majority in year t, 0 otherwise}.

A)    Yt = b1Dt + b2Xt + et.

B)    Yt = b0 + b1Dt + et.

C)    Yt = b0 + b1Dt + b2Xt + et.

答案和详解如下:

Q6. An analyst is trying to determine whether fund return performance is persistent. The analyst divides funds into three groups based on whether their return performance was in the top third (group 1), middle third (group 2), or bottom third (group 3) during the previous year. The manager then creates the following equation: R = a + b1D1 + b2D2 + b3D3 + ε, where R is return premium on the fund (the return minus the return on the S& 500 benchmark) and Di is equal to 1 if the fund is in group i. Assuming no other information, this equation will suffer from:

A)   heteroskedasticity.

B)   serial correlation.

C)   collinearity.

Correct answer is C)

There are too many dummy variables specified, so the equation will suffer from collinearity.

Q7. Suppose the analyst wants to add a dummy variable for whether a person has an undergraduate college degree and a graduate degree.  What is the correct representation if a person has both degrees?

              Undergraduate Degree  Graduate Degree

              Dummy Variable      Dummy Variable

A)                        1                     1

B)                        0                     0

C)                        0                     1

Correct answer is A)

Assigning a zero to both categories is appropriate for someone with neither degree. Assigning one to the undergraduate category and zero to the graduate category is appropriate for someone with only an undergraduate degree. Assigning zero to the undergraduate category and one to the graduate category is appropriate for someone with only a graduate degree. Assigning a one to both categories is correct since it reflects the possession of both degrees.

Q8. The amount of the State of Florida’s total revenue that is allocated to the education budget is believed to be dependent upon the total revenue for the year and the political party that controls the state legislature. Which of the following regression models is most appropriate for capturing the effect of the political party on the education budget? Assume Yt is the amount of the education budget for Florida in year t, X is Florida’s total revenue in year t, and Dt = {1 if the legislature has a Democratic majority in year t, 0 otherwise}.

A)    Yt = b1Dt + b2Xt + et.

B)    Yt = b0 + b1Dt + et.

C)    Yt = b0 + b1Dt + b2Xt + et.

Correct answer is C)         

In this application, b0, b1, and b2 are estimated by regressing Yt against a constant, Dt, and Xt.  The estimated relationships for the two parties are:

Non-Democrats:

Ŷ = b0 + b2Xt

Democrats:

Ŷ = (b0 + b1) + b2Xt

TOP

[em03]

TOP

[em02]

TOP

1

TOP

 thanks

TOP

 thanks

TOP

x

TOP

caca
Just do it

TOP

goos

TOP

返回列表