# Coursework, Finance and Accounting

Coursework, Finance and Accounting
Econometrics

Project description
Econometrics assignment

Topics include :

1. Properties of single variable OLS

2. Multivariate OLS

3. Hypothesis testing and Causality

4. Model Specification

5. Transformations of variables

6. Dummy variables and interactions

Notes: The critical values for t-tests and f-tests can be found from for instance this site:
http://www.statsoft.com/textbook/distribution-tables/ , or from most Econometrics books.
You have data for 15-year old British students, and their results on a reading test. ‘read’ is the score
in the reading test, ‘noroom’ is a dummy variable indicating that the student does not have a room of
her own at home, and ‘noeng’ is another dummy variable indicating that English is not spoken at
home. Variable ‘fiction’ is an integer from 1 to 5, indicating the student’s response to a question “Do
you like to read fiction?”, where response “1” indicates “not at all” and “5” indicates “Very much”,
with values 2-4 being intermediate. You estimate two models as follows. The estimated standard
errors are in parenthesis.
(Model 1) read = 499.3 – 20.8*noroom – 45.3*noeng N = 11984, R2 = 0.020
(0.9) (2.9) (3.4)
(Model 2) read = 419.7 – 18.6*noroom – 50.0*noeng + 29.4*fiction N = 11984, R2 = 0.204
(1.7) (2.6) (3.1) (0.6)
1. Using results of Model 2, interpret the coefficient for noroom, and test for the null hypothesis that
the parameter is -20 against an alternative hypothesis that it is larger (less negative) than -20, at 5%
significance level. [20 marks]
2. Are students whose home language is not English, more or less eager readers of fiction than those