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Assignment example - Econometrix
Finance & Accounting
Pages 4 (1004 words)
Econometrix Assignment The following model had been established by conducting a survey on the representative sample of UK workers in year 2004. (Model 1) (0.170) (0.003) (0.023) N = 21600, R2 = 0.025 1a. The sample size as represented by N is 21600 while the value of R2 is equal to 0.025…
Extract of sample
Test for Significance of Coefficient In order to test the significance of the coefficient, the following hypotheses have been drawn. Ho: The coefficient is equal to zero H1: The coefficient is greater than zero Test Statistics In order to test the significance of the coefficient of Age, t statistic is needed to be calculated. Formula In the given case, the estimated coefficient may be referred as ?Age = 0.043 while the Standard error for ?Age = 0.003. Therefore, Now for the given data set the t tabulated value had been found using the degree of freedom in the given case is 21600 – 3= 21597. The significance level for the test is 1%. The t critical value for the given data is found to be 2.326 (Allison, 1991). Decision Rule The Null hypothesis is rejected if t calculated is greater than t tabulated. Conclusion Since the t calculated value is greater than the t tabulated value i.e. 14.3333>2.326, hence the criteria suggests rejecting the null hypothesis. So it can be concluded that the coefficient value is not equal to zero. 1b. The equation required for the desired calculation is In the given case, Age= 30 years Size= 100 employees Therefore, the earnings calculated for the given age and size is equal to 7.337 pounds (Belsley, Kuh & Welsch, 2005). ...
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