# Answers to Worksheet Ch. 5 by ixf48901

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```									This data was used to introduce the notion of dummy variables. It is also useful to test you
knowledge of serial correlation. (D3:E20 are not write protected, you can change them as you wish.)
Bonds (hundreds of National Income
Year                                         War
millions)          (billions)
1933            2.6               2.4          0
1934             3                2.8          0
1935            3.6               3.1          0
1936            3.7               3.4          0
1937            3.8               3.9          0
1938            4.1                 4          0
1939            4.4               4.2          0
1940            7.1               5.1          1
1941             8                6.3          1
1942            8.9               8.1          1
1943            9.7               8.8          1
1944           10.2               9.6          1
1945           10.1               9.7          1
1946            7.9               9.6          0
1947            8.7              10.4          0
1948            9.1                12          0
1949           10.1              12.9          0
Source
so useful to test your
m as you wish.)
Name:
Instructions: Type answers in the yellow spaces provided. Reformat the height of rows as necessary to accommodate your
This lab provides you with the opportunity to test for serial correlation using the Durbin-Watson test. This lab utilizes the data
set used to introduce the notion of dummy variables a couple of labs ago. If answering questions with numerical values, you
can place those numbers in column B as necessary (using =cell reference to appropriate cell on the regression worksheet
(rather than typing in numbers)).
Q1)       Why is it appropriate to test for serial correlation in this instance?
A1)
Q2)       Run the regression without the dummy variable War (click Line Fit Plots and Residual Plots). Call this worksheet
Reg1. Does the line fit plot or the residual plot exhibit evidence of a problem with the regression? (This was answered
at length during the earlier lab, so you can be brief here.)
A2)
Q3)       Are either of these plots appropriate to examine whether there is serial correlation? Explain. If not provide a plot on
Reg1 that is appropriate to examine serial correlation.
A3)
Q4)       Is there evidence of serial correlation based on the residual plot over time? If so, does this look more like positive or
negative serial correlation? Explain.
A4)
Q5)       Find dlower and dupper for this regression and place the values for these numbers in cells B12 and B13 respectively.
Briefly describe how you obtained these values.
A5)               =dlower .
=dupper .
Q6)         Calculate a Durbin Watson statistic for this regression. Place the value for this statistic in cell B15.
A6)
Q7)         Based on your answers to questions 5 and 6, does this regression exhibit serial correlation? Explain.
A7)
Q8)         Run the regression with the dummy variable War (click Line Fit Plots and Residual Plots). Call this worksheet Reg2.
Does the line fit plot or the residual plot exhibit evidence of a problem with the regression?
A8)
Q9)         Are either of these plots appropriate to examine whether there is serial correlation? Explain. If not provide a plot on
Reg2 that is appropriate to examine serial correlation.
A9)
Q10)   Is there evidence of serial correlation based on the residual plot over time? If so, does this look more like positive or
negative serial correlation? Explain.
A10)
Q11)   Find dlower and dupper for this regression and place the values for these numbers in cells B12 and B13 respectively.
Briefly describe how you obtained these values.
A11)              =dlower .
=dupper .
Q12)   Calculate a Durbin Watson statistic for this regression. Place the value for this statistic in cell B15.
A12)
Q13)   Based on your answers to questions 11 and 12, does this regression exhibit serial correlation? Explain.
A13)
Q14)   Why do your answers to 7 and 13 differ? Does this cause you to prefer one model over the other?
A14)

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