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Econometrics I Question Paper

Econometrics I

Course:Master Of Economics

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
SUPPLEMENTARY EXAMINATION FOR THE DEGREE OF
MASTERS OF ECONOMICS

EES 500: ECONOMETRICS I

DATE: Thursday
26th November 2009
TIME: 9.00 am-12.00 Noon

INSTRUCTIONS
Answer ALL questions
Question One
a)
What is meant by mutilcollinearity? [1.5marks]
b)
The variances of least square estimates become infinitely large in presence of multicollinearity: True or false, Proof the statement mathematically [6marks]
c)
Using inverse least square method, illustrate how multicollinearity can be solved. [7marks]
d)
State three causes of the disturbance term. [3marks]
Question Two
a)
What is meant by mean square error (MSE)? [3marks]
b)
Prove that the mean square error equals the variance plus the square of the bias of the estimator: MSE(ˆb) = Var b + (biasb)2 [10marks]
c)
“R-squared will never decrease when another variable is added to a regression equation”. To prove whether the movement of R-squared is significant, analysis of variance is used. Show that F can be used as a test of significance of R-squared. [4.5marks]
Question Three
a)
Outline the goals of econometrics. [2.5marks]
b)
Given that ˆ
ß (X ' X ) 1- m= X 'Y , proof that ßˆ is an unbiased estimator of the true parameter ß [6marks]
c)
State and explain three characteristics of a good estimator. [9marks]
Question Four
a)
Outline four sources of autocorrelation. m[4marks]
b)
Given the AR (1) scheme, show that Var (u E u [8marks] t ) = ( 2t)=s 2e
c)
Proof that the variance of y is equal to the variance of the error term ut. n[5.5marks]

Econometrics I Question Paper

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