0% found this document useful (0 votes)
48 views9 pages

Individual Assignment

This document contains an individual assignment submitted by Semon Worku for the course MBA631 Basic Econometrics. The assignment contains three parts: 1) True/False and multiple choice questions to test understanding of econometric concepts. 2) Workout problems involving regression analysis to model relationships between variables. Regressions are estimated and interpreted to understand how study hours, anxiety, lending interest rates, and bank branches impact student scores and bank profits. 3) Diagnostic tests are conducted to check the adequacy and assumptions of the regression models, including tests for significance, heteroscedasticity, and multicollinearity. Results indicate some variables are significant predictors and one model exhibits heteros

Uploaded by

semon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
48 views9 pages

Individual Assignment

This document contains an individual assignment submitted by Semon Worku for the course MBA631 Basic Econometrics. The assignment contains three parts: 1) True/False and multiple choice questions to test understanding of econometric concepts. 2) Workout problems involving regression analysis to model relationships between variables. Regressions are estimated and interpreted to understand how study hours, anxiety, lending interest rates, and bank branches impact student scores and bank profits. 3) Diagnostic tests are conducted to check the adequacy and assumptions of the regression models, including tests for significance, heteroscedasticity, and multicollinearity. Results indicate some variables are significant predictors and one model exhibits heteros

Uploaded by

semon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 9

Debre Birhan University

College of Business and Economics

Department of Management, (MBA) Extension Program

Basic Econometrics (MBA631)

Individual Assignment

Prepared by: - Semon Worku, Section B

Submitted to: - Dr. Muhammed Siraj


Submission Date 5/3/22 G.C
Part I: True or False
1) True 10) True
2) True 11) True
3) False 12) True
4) True 13) False
5) True 14) True
6) True 15) True
7) False 16) True
8) False 17) True
9) True

Part II: Choose the best Answer


1) B 8) B
2) D 9) B
3) C 10) D
4) A 11) C
5) D 12) C
6) C 13) A
7) D

1|Page
Part III: Workout
1) Given
n – number of observations = 30.

Required
A) Find the least squares regression equation of Y on X1 and X2 and interpret the resulting
slope coefficients of the regression model.

First, let’s find the coeffient of the explanatory variables and the slope of the model.

2|Page
So, our regression model becomes:
Ῠ = 47.6794 + 0.4075X1 – 0.6438X2

Where;
Ῠ - Score of the student
X1 – Average hours spent to study the course per week
X2 – Level of anxiety as percentage of hours allotted for the course’s final exam

3|Page
Interpretation of the Model
 If a student does not use average hours to study the course per week and ignore level of
anxiety as percentage of hours allotted to the course, the student would score 47.6794.

 If the average hours spent to study the course per week increase by 1hr, the score of the
student would increase by 0.4075 assuming level of anxiety per percentage of hours
allotted for the final exam of the course is unchanged.

 If level of anxiety as percentage of hours allotted for the course’s final exam increases by
1%, the score of the student would decrease by 0.6438 assuming average hours spent to
study the course is unchanged.

B) Compute the coefficient of multiple determination and interpret the result.

The value of coeffient of determination (86.98%) shows that variation of score of the
student under consideration is explained by variation in average hours spent to study the
course per week and level of anxiety as percentage of hours allotted to the course’s final
exam and the rest 13.02% is remained unexplained by the regression model which could
be the result of other factors.

4|Page
C) Undertake an overall significance test at 5% level of significance (show the necessary
steps to conduct the test).

Since Fcal > Fcrt, we reject the null hypothesis that is Ho: B 1=B2=0 and average hours spent to
study the course per week and level of anxiety as percentage of hours allotted for the course’s
final exam become statistically significant to determine score of the student.

2) Given

A) Interpret the regression result

Interpretation of the regression model


 If the average annual lending interest rate and number of branches the bank has was
ignored from the equation, the annual net profit of the bank would decrease by 1.01
million birr.

 If the average annual lending interest rate increased by 1%, the annual net profit of the
bank would decrease by 0.7 million birr assuming the number of branches of the bank is
unchanged.

5|Page
 If the number of branches of the bank is increased by 1 branch, the annual net profit of
the bank would increase by 0.2 million birr assuming the average annual lending interest
rate is unchanged.

B) Check whether interest rate and number of branches are statistically significant in
explaining banks net annual profit at 5% level of significance.

Since tcal = 6.140 > ttab = 2.052, we reject the null hypothesis at 5% level of significance.
Therefore, the annual lending interest rate is significant determinant of the annual net profit of
the bank.

Since tcal = 5.263 > ttab = 2.052, we reject the null hypothesis at 5% level of significance. The
number of branches the bank has is significant determinant of the annual net profit of the bank.

6|Page
C) Check the adequacy of the regression model at 5% level of significance.

Since Fcal = 84.4313 > Fcrt = 3.354, we reject the null hypothesis and confirm that the average
lending interest rate and the number of branches the bank has are significant determinant of the
bank’s annual net profit and R2 = 0.8612 shows the degree the two explanatory variables explain
the dependent variable. So, we can deduce the model is adequate.

D) Suppose you are interested in investigating whether there is a heteroscedasticity problem in


the above results or not, and you find following results using a white test. Do you see
heteroscedasticity problem in our result at 5% level of significance (don’t forget to state the
auxiliary regression function used to undertake the test and the null and alternative
hypothesis)?

7|Page
Given

Since X2cal = 25.836 > X2tab0.05(5) = 11.07, we reject the null hypothesis of the homoskedacity
assumption at 5% level of significance.

E) You further interested to check whether there is multicollinearity problem in the above result
or not using VIF. Do you see multicollinearity problem the result below?

From the above table it is shown that, value of 1/VIF is close to 1 and value of VIF < 10. Therefore,
we can conclude the average annual lending interest rate and the number of branches the bank has are
not correlated.

8|Page

You might also like