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Study Resources (Statistics)

Multiple Choice 1)In nonlinear models, the expected change in the dependent variable for a change in one of the explanatory variables is given by a.. b.. c.. d.. 2)The interpretation of the slope coefficient in the model is as follows: a.a 1% change in X is associated with a % change in Y. b.a 1% change.
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Multiple Choice 1)The analysis is externally valid if a.the statistical inferences about causal effects are valid for the population being studied. b.the study has passed a double blind refereeing process for a journal. c.its inferences and conclusions can be generalized from the population and setting studied to other populations and settings. d.some committee outside the.
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8)Sir Francis Galton (1822-1911), an anthropologist and cousin of Charles Darwin, created the term regression. In his article “Regression towards Mediocrity in Hereditary Stature,” Galton compared the height of children to that of their parents, using a sample of 930 adult children and 205 couples. In essence he found that.
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Essays and Longer Questions 1)Females, it is said, make 70 cents to the dollar in the United States. To investigate this phenomenon, you collect data on weekly earnings from 1,744 individuals, 850 females and 894 males. Next, you calculate their average weekly earnings and find that the females in your sample.
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10)One of the most frequently estimated equations in the macroeconomics growth literature are so-called convergence regressions. In essence the average per capita income growth rate is regressed on the beginning-of-period per capita income level to see if countries that were further behind initially, grew faster. Some macroeconomic models make this.
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2)An extension of the Solow growth model that includes human capital in addition to physical capital, suggests that investment in human capital (education) will increase the wealth of a nation (per capita income). To test this hypothesis, you collect data for 104 countries and perform the following regression:   =.
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1.1   Multiple Choice 1) Which of the following is not a derivative instrument? A) Contract to sell corn B) Option agreement to buy land C) Installment sales agreement D) Mortgage backed security 2) Who from the following list would be considered a speculator by entering into a futures or options contract on commodities? A) Farmer B) Corn delivery.
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4)The Phillips curve is a relationship in macroeconomics between the inflation rate (inf) and the unemployment rate (ur).  Estimating the Phillips curve using quarterly data for the United States from 1962:I to 1995:IV, you find = 4.08 + 0.118 , 0.003, SER = 3.148 (1.11)(0.176) (a)Explain why, at first glance, this is a.
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8)After analyzing the age-earnings profile for 1,744 workers as shown in the figure, it becomes clear to you that the relationship cannot be approximately linear. You estimate the following polynomial regression model, controlling for the effect of gender by using a binary variable that takes on the value of one.
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6.2   Short Answer Essay Questions 1) Explain how a negative correlation between agricultural production and commodity prices creates a natural hedge. 2) Give one example of how price discovery functions in the commodity futures market. 3) Why is the cash-and-carry strategy employed in the financial futures market not readily available in the commodity.
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13)The textbook derived the following result: . Show that this is the same as . 14)Your textbook has analyzed simultaneous equation systems in the case of two equations, , where the first equation might be the labor demand equation (with capital stock and technology being held constant), and the second the labor supply.
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11.1   Multiple Choice 1) Consider a two-period binomial model, where each period is 6 months. Assume the stock price is $46.00, σ = 0.28, r = 0.06 and the dividend yield is 2.0%. What is the maximum approximate strike price where early exercise would occur with an American call option? A) $29 B).
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Mathematical and Graphical Problems 1)Give at least three examples from economics where you expect some nonlinearity in the relationship between variables. Interpret the slope in each case. 2)Suggest a transformation in the variables that will linearize the deterministic part of the population regression functions below. Write the resulting regression function in a.
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9.1   Multiple Choice 1) Jafee Corp. common stock is priced at $36.50 per share. The company just paid its $0.50 quarterly dividend. Interest rates are 6.0%. A $35.00 strike European call, maturing in 6 months, sells for $3.20. What is the price of a 6-month, $35.00 strike put option? A) $1.20 B) $1.64 C).
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5.2   Short Answer Essay Questions 1) Explain the impact transaction costs have on the ability to make arbitrage profits in forward and futures markets. 2) Name some advantages that futures contracts have over forward contracts. 3) What is the process involved in creating a cash-and-carry strategy? 4) What are some uses for index futures.
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Essays and Longer Questions 1)Until about 10 years ago, most studies in labor economics found a small but significant negative relationship between minimum wages and employment for teenagers. Two labor economists challenged this perceived wisdom with a publication in 1992 by comparing employment changes of fast-food restaurants in Texas, before and.
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9.2   Short Answer Essay Questions 1) Using the synthetic long stock strategy, explain the difference in call and put prices. 2) Jillo, Inc. stock is selling for $54.70 per share. Calls and puts with a $55.00 strike and 40 days until expiration are selling for $1.65 and $1.23, respectively. Draw a profit.
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11.2   Short Answer Essay Questions 1) Under what circumstances should an option be exercised early? 2) What is the relationship between dividends and the forecasted stock price in a binomial model? 3) In a binomial pricing model, what is the lowest price of an option at any node and why? 4) What is the.
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Mathematical and Graphical Problems 1)Your textbook gives the following example of simultaneous causality bias of a two equation system: In microeconomics, you studied the demand and supply of goods in a single market. Let the demand () and supply () for the i-th good be determined as follows, , , where P is the price.
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5)Your professor wants to measure the class’s knowledge of econometrics twice during the semester, once in a midterm and once in a final. Assume that your performance, and that of your peers, on the day of your midterm exam only measure knowledge imperfectly and with an error, , where is your.
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11) (Requires Calculus) In the equation , the following income level results in the maximum test score a.607.3. b.91.02. c.45.50. d.cannot be determined without a plot of the data. 12)To decide whether or  fits the data better, you cannot consult the regression because a.ln(Y) may be negative for 0<Y<1. b.the TSS are.
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8.1   Multiple Choice 1) Given zero-coupon bond yields are 2.0%, 2.5%, and 2.8% in years 1, 2, and 3, respectively, calculate the prepaid swap price for corn. Assume corn forward prices for the proceeding 3 years are $5.00, $5.20, and $5.35, respectively. A) $14.87 B) $15.04 C) $16.12 D) $16.20 2) What is the 3-year swap.
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8.2   Short Answer Essay Questions 1) Describe briefly the nature of a swap and its primary component. 2) Under what circumstances would a multinational company elect to enter into a currency swap agreement? 3) Explain a "diff swap" as it relates to currency swaps. 4) How would a market-maker hedge a swap involving variable.
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10.1   Multiple Choice 1) A stock is currently selling for $22.00 per share. Ignoring interest, determine the intrinsic value of a call option should there exist equally probable stock prices of $25.00 and $23.00. A) $0.00 B) $1.00 C) $2.00 D) $3.00 2) Compute Δ for the following call option. The stock is selling for $23.50..
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6.1   Multiple Choice When answering the questions below, refer to the following table of commodity forward and spot prices. The annual risk free interest rate is 4.0%. Table 6.1 1) Refer to the table 6.1. What is the approximate annualized lease rate on the 12-month corn forward contract? A) 0.00% B) 2.25% C) 3.92% D) 7.84% 2) Refer.
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3.2   Short Answer Essay Questions 1) Explain how a long stock and long put strategy equals the cash flow from a long call strategy. 2) Why might the manager of a portfolio employ a protective put strategy? 3) What is the difference between naked and covered call writing? 4) What are the similarities and.
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7.2   Short Answer Essay Questions 1) What is the pure yield curve and why is it common to present coupon-based yield curves in practice? 2) Explain the expectations hypothesis and its ability to accurately forecast interest rates. 3) Explain the process of creating a synthetic Forward Rate Agreement. 4) What is the rationale behind.
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(10)You have estimated an earnings function, where you regressed the log of earnings on a set of continuous explanatory variables (in levels) and two binary variables, one for gender and the other for marital status. One of the explanatory variables is education. (a)Interpret the education coefficient. (b)Next, specify the binary.
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10)One of the most frequently used summary statistics for the performance of a baseball hitter is the so-called batting average. In essence, it calculates the percentage of hits in the number of opportunities to hit (appearances “at the plate”). The management of a professional team has hired you to predict.
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11)Misspecification of functional form of the regression function a.is overcome by adding the squares of all explanatory variables. b.is more serious in the case of homoskedasticity-only standard error. c.results in a type of omitted variable bias. d.requires alternative estimation methods such as maximum likelihood. 12)Errors-in-variables bias a.is only a problem in small samples. b.arises from.
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4.2   Short Answer Essay Questions 1) From a strictly conceptual perspective, why would any manufacturer consider hedging their variable costs? Answer as if you own the company. 2) Why would a manufacturer elect to use a long call strategy instead of a forward contract to hedge the risk associated with variable costs? 3).
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3)Keynes postulated that the marginal propensity to consume (MPC = ) is between zero and one. He also hypothesized that the average propensity to consume (APC =) would fall as personal disposable income increased. (a)Specify a linear consumption function. Show that the assumption of a falling APC implies the.
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17)Give at least three examples where you could envision errors-in-variables problems. For the case where the measurement error occurs only for the explanatory variable in the simple regression case, derive . The formula is derived in Chapter 7, footnote 2 of the textbook. 18)              Your textbook states that correlation of the.
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4)You have learned that earnings functions are one of the most investigated relationships in economics. These typically relate the logarithm of earnings to a series of explanatory variables such as education, work experience, gender, race, etc. (a)Why do you think that researchers have preferred a log-linear specification over a linear.
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1.2   Short Answer Essay Questions 1) Why might a variable rate mortgage be considered a "derivative" and a fixed rate mortgage not? 2) Why would a corn farmer, who maintains a short futures contract after harvesting and selling her crop, be considered a speculator? 3) For families employed and living in "company towns".
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14)Many countries that experience hyperinflation do not have market-determined interest rates. As a result, some authors have substituted future inflation rates into money demand equations of the following type as a proxy: (m is real money, and P is the consumer price index). Income is typically omitted since movements in it are.
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