ECON424 Final

Which one is correct about dummy variables? Check all that apply.
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Which one is correct about dummy variables? Check all that apply.
1. Categorical variables with no natural orders, such as types of car, among categories MUST be converted into a set of dummy variables.
2. Categorical variables with natural orders, such as customers' evaluation of a commodity, among categories can be converted into regular variables OR a set of dummy variables.
Which one is correct about using dummy variables in regressions? Check all that apply.
The number of dummy variables we use in a regression is limited only by the number of observations, i.e., degrees of freedom.
Which one is correct about using dummy variables in regressions? Check all that apply.
1. In dealing with gender, adding a dummy for male and another dummy for female is not accepted, because of perfect collinearity.
2. Adding multiplication of dummy variables, similar to adding dummy variables, only SHIFTS up or down the fitted lines between the variable of interest and numerical variables.
Which one is correct about using multiplication of dummy variables and numerical variables in regressions? Check all that apply.
1. It is possible that both dummy variable and the numerical variable are statistically significant, but the interaction is completely insignificant.
2. We use the interaction between dummy variables and numerical variables to analyze the different effects of numerical variables on variables of interest for different groups in the dummy variable.
Which one is correct about linear probability model? Check all that apply.
1. It is estimated using the OLS method
2. Its simplicity is so appealing that many prefer to use it despite its shortcomings.
Which one is correct about logit model? Check all that apply.
1. Its predicted probability is always in the range of zero and one.
2. It cannot be estimated using the OLS method; we use the Maximum Likelihood method.
3. Regular R-squared is not valid for the model.
Which one is correct about odd-ratio? Check all that apply.
1. It is the probability of dependent variable being one relative to the dependent variable being zero.
2. Its log (log odd function) is a linear function of explanatory variables.
Which one is correct about pseudo-R-squared and its components? Check all that apply.
1. If the model has no explanatory power, its pseudo-R-squared is zero.
2. Pseudo R-squared is always between zero and one.
Which one is correct about the effect of heteroscedasticity? Check all that apply.
1. Under heteroscedasticity, hypothesis testing may result in an incorrect decision.
2. Under heteroscedasticity, OLS estimators are no longer BLUE.
3. Under heteroscedasticity, variances of OLS estimators are no longer valid.
Which one is correct about autocorrelation in errors? Check all that apply.
1. With autocorrelated errors, OLS estimators are no longer BLUE.
2. With autocorrelated errors, regular test statistics calculated using OLS are no longer valid.
Which one is correct about correcting issues of heteroscedasticity and autocorrelation? Check all that apply.Sometimes using functional forms such as logarithmic functions corrects the issue.Which one is the idea of tests of detecting heteroscedasticity such as Bruesch-Pagan test?Regress squared residuals on explanatory variables and test the overall validity (significance) of the entire model.Which one is correct for tests of detecting autocorrelation?1. Durbin's alternative test statistic has a chi-squared distribution. 2. Durbin-Watson test is a test of detecting autocorrelation with a test statistic the takes a value between zero and four.Which one is correct about time series data? Check all that apply.1. It is more prone to the violation of independence assumption. 2. It is likely that time plays the role of an independent explanatory variable.Which one is correct about stationarity? Check all that apply.1. Covariance stationarity is a less restrictive version of stationarity. 2. In stationary data, the average and the variance of observations remain constant over time.Which one is correct about AFC and PACF? Check all that apply.1. We use AFC and PACF to identify the type of the model and its order, i.e., number of lagged valued. 2. PACF is a direct coefficient of correlation between the variable at time t and its lagged values, after taking the effect of other factors into consideration. 3. ACF is a series of coefficients of correlation between the variable at time t and its lagged values.Which one is correct about autoregressive of order one? Check all that apply.1. Its partial autocorrelation function has only one spike at the first lag. 2. The effects of shocks gradually disappear over timeWhich one is correct about forecasting in time series data? Check all that apply.1. Forecasting refers to "out-of-sample" or simply future values of the variable of interest. 2. Forecasting is one of the main goals of time series analysis.Which one is correct about a random walk process? Check all that apply.1. Its highly consistent behavior comes from the fact that it transfers past to future without diminishing its effect. 2. First differencing a random walk generates a stationary time series.Which one is correct about the basic Dickey-Fuller test?1. It tests for the existence of unit root. 2. It is a one-sided test and the rejection region is in the left-hand side.Which one is correct about the relationship between two non-stationary of degree one variables? Check all that apply.They may or may not have long-term and/or short-term relationship.Which one is correct about two cointegrated I(1) time series? Check all that apply.1. A linear combination of them is stationary. 2. We must use Dickey-Fuller test to detect the stationarity of residuals of the regression of the two variables.Which one is correct about the error correction model. Check all that apply.1. It contains the errors from the long-term regression to adjust for a possible long-term relationship. 2. It discovers the short-term relationship after adjusting for the long-term relationship.Which one is correct about panel data? Check all that apply.Unobservable time-invariant factors do not change over time, so we can control for them in panel data.Which one is correct about three types of variations in a panel data of students' scores? Check all that apply.1. If each student always gets the same score, within variation is zero 2. If instructors believes in perfect equality of students in scores, between variation is zero.Which one is correct about different estimators using panel data? Check all that apply.1. Dummy variable estimators are technically the same as fixed-effects estimators. 2. Dummy variable estimators cannot be applied in cross-sectional data because of the number of variables cannot be more than the number of observations.Which one is correct about the three R-squared measures calculated in the fixed-effects and random-effects regressions of a panel of students' scores and their study time? Check all that apply.1. Between R-squared is based on ignoring the variations in individual scores over time and works with the average score of each individual over time. 2. Within R-squared describes how much of the variations in individual scores can be explained by the variation in their study time, regardless of their differences with other students.Which one is correct about fixed-effects models and random-effects models? Check all that apply.1. Random-effects models assume that individual characteristics are completely random factors. 2. Fixed-effect estimators are better than random-effects estimators if there is indeed a correlation between individual characteristics and idiosyncratic error terms. 3. Fixed-effects models assume that there is a correlation between individual characteristics and idiosyncratic error terms.What is the problem of counterfactual in program evaluation? Check all that apply.1. The average difference between outcomes in the control group and treatment group is not the causal effect of treatment. 2. At any point in time, an individual is only in the treatment group or control group.Which one of the following methods relies heavily on observable variables to define counterfactuals? Check all that apply.Matching methodsWhich one is correct about issues we face in RCTs? Check all that apply.1. Individuals may behave different from their normal-life behavior simply because they participate in a program. 2. It is usually very costly and time consuming. 3. Individuals make choices, and these choice may mix up control and treatment groups.Which one is correct about the dif-in-dif method? Check all that apply.1. Its accuracy hinges on the equality of secular trends in the control and treatment groups over time. 2. The differences between treatment and control group before the introduction of the program is used to remove the bias.Which one is correct about coefficients in the dif-in-dif method? Check all that apply.1. The coefficient of interaction between time dummy and treatment dummy is the dif-in-dif estimator and shows the causal effect of program. 2. The constant term in the regression shows the average value of the outcome variable for the control group before treatment. 3. The coefficient of treatment variable captures the difference between the treatment and control group before treatment.