Econometrics Homework 3 A) The following data are respectively,

Econometrics Homework 3 A) The following data are respectively,

IGE: investment expenditure of GE FGE: fixed capital of GE last year CGE: profit of GE last year

IWEST: investment expenditure of Westinghouse FWEST: fixed capital of Westinghouse last year CWEST: profit of Westinghouse last year

1) The model to be estimated is

0 1

( )

( )

investment b   b fixed capital  b profit   . The model says that the investment expenditures for these two companies are explained by the fixed capital and profit in the last year. Please estimate the investment functions of these two companies and present your results.

2) Do a Chow test to determine if these two companies have the same investment functions.

3) Do a test to determine if the slopes of these two investment functions are the same given the assumption that their intercepts equal.

4) Do a White’s test of heteroskedasticity.

5) Do a Goldfeld-Quandt test of heteroskedasticity.

IGE FGE CGE IWEST GWEST CWEST

33.1 1170.6 97.8 12.93 191.5 1.8

45.0 2015.8 104.4 25.90 516.0 0.8

77.2 2803.3 118.0 35.05 729.0 7.4

44.6 2039.7 156.2 22.89 560.4 18.1

48.1 2256.2 172.6 18.84 519.9 23.5

74.4 2132.2 186.6 28.57 628.5 26.5

113.0 1834.1 220.9 48.51 537.1 36.2

91.9 1588.0 287.8 43.34 561.2 60.8

61.3 1749.4 319.9 37.02 617.2 84.4

56.8 1687.2 321.3 37.81 626.7 91.2

93.6 2007.7 319.6 39.27 737.2 92.4

159.9 2208.3 346.0 53.46 760.5 86.0

147.2 1656.7 456.4 55.56 581.4 111.1

146.3 1604.4 543.4 49.56 662.3 130.6

98.3 1431.8 618.3 32.04 583.8 141.8

93.5 1614.5 647.4 32.24 635.2 136.7

135.2 1819.4 671.3 54.38 723.8 129.7 157.3 2079.7 726.1 71.78 864.1 145.5 179.5 2371.6 800.3 90.08 1193.5 174.8 189.6 2759.9 888.9 68.60 1188.9 213.5

B) Use the data provided in the following to do the following questions:

X Y

0 2 1

0 4 2

0 6 2

0 10 4

0 13 6

1 2 1

1 4 3

1 6 3

1 8 5

1 10 6

1 12 6

1 14 7

1 16 9

1 18 9

1 20 11

and X

and X

are the first 5 and the last 10 observations in X respectively; and Y

and Y

are the first 5 and the last 10 observations in Y respectively.

B1) Estimate the following model:

 

 



 



 









 







 

 



 

 

 





2 1

2 2 1 1

2 1

2 1

1 0 0

0 0 1



 b a b a X X

y y

B2) Test the following hypothesis with two different methods.

a) H

: a

=a

, b

=b

b) H

: a

=a

| b

=b

c) H

: b

=b

| a

a