MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS
2016/2017 ACADEMIC YEAR
FOURTH YEAR SECOND SEMESTER
SCHOOL OF BUSINESS AND ECONOMICS
BACHELOR OF ARTS (ECONOMICS)
COURSE CODE: ECO 413
COURSE TITLE: ECONOMETRICS II
DATE: 11TH MAY 2017 TIME: 0830 – 1030 HRS
INSTRUCTIONS TO CANDIDATES
Answer Question ONE and any other THREE questions
This paper consists of 3 printed pages. Please turn over.
QUESTION 1
Explain the assumptions of OLS method. ( 5 Marks)
Enumerate the solutions to the problem of Multicollinearity. ( 5 Marks)
Explain the meaning of DUMMY variable and why it is important in regression analysis. ( 5 Marks)
If y=f(x_1,x_2,x_3 ) but someone estimates a simple linear for each independent variable identify the problem and explain the consequence. ( 5 Marks)
Enumerate the characteristics of OLS estimates and explain why only one cannot suffice. ( 5 Marks)
QUESTION 2
The following cross sectional data was presented for regression analysis using OLS method. However the supervisor doubts the authenticity due to suspected econometric problem.
Y 11 9 6 13 11 12 13 14 9 6 8 11 10 9 8 12 13 10 10 9 11 12
X 3 5 4 6 2 9 4 4 5 4 3 5 4 5 2 6 3 5 3 3 6 5
Required:
Test for the existence of the possible problem. (10 Marks)
The consequences of the problem. (5 Marks)
QUESTION 3
If the dependent variable Y is theorized to be influenced by X and Gen, and that data collected is presented as follows:
Required:
The linear regression coefficients. (8 Marks)
Proportion of the dependent variable explained by X and Gen. (2 Marks)
Interpretation of the coefficients. (3 Marks)
The expression of Y if the dummy variable is assumed to affect the slope. (2 Marks)
QUESTION 4
Time Series data is given as follow and ɖ = 0.6. (Where d is Durbin-Watson statistic)
Yt 6 7 9 14 20 21 26 30 36 38
Xt 15 12 11 9 6 4 2 1 3 4
Required:
Confirmation of the presence/absence of autocorrelation. (5 Marks)
The coefficients of linear regression. (10 Marks)
QUESTION 5
For a given medical course it is alleged that there is need for one to pass in mathematics and biology in order to be admitted. Data on performance of ten students randomly chosen is given as follows:
Med 70 68 53 60 72 80 70 45 50 61
MATHS 40 44 45 50 40 80 60 60 50 58
BIOLOGY 80 72 45 60 79 82 80 47 40 50
Required:
Whether or not the two mathematics and/or Biology should still be considered as prerequisites for the medical course. (15 Marks)
