2009 16 Revision Paper(2021) PDF

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WESTERN SYDNEY UNIVERSITY

REVISION PAPER – SPRING SESSION 2021 School of Business Complete your details in this section when instructed by the Exam Supervisor at the start of the exam. You should also complete your details on any answer booklets provided.

STUDENT SURNAME: STUDENT FIRST NAME: STUDENT ID: EXAM INSTRUCTIONS Read all the information below and follow any instructions carefully before proceeding. This exam is printed on both sides of the paper - ensure you answer all the questions. You may begin writing when instructed by the Exam Supervisor at the start of the exam. Clearly indicate which question you are answering on any Examination Answer Booklets used

UNIT NAME:

ECONOMIC AND FINANCIAL MODELLING

UNIT NUMBER:

200916

NUMBER OF QUESTIONS:

32

VALUE OF QUESTIONS:

The examination in total is worth 50 marks and contributes 50% to your final assessment. There are two (2) parts in this examination paper. Part A is Multiple Choice Questions worth 10 marks. You must answer all questions in this part. There are two (2) sections in Part B. Section Bl is made up of short answer and empirical questions. You have to answer three (3) of the four (4) questions in this section. Finally, Section B2 on computer analysis, requires you to answer all questions in this section. Part B adds up to 40 marks.

ANSWERING QUESTIONS:

Answer Part A-multiple choice questions on the scan sheet provided. Answer all other questions in the Examination Answer Booklet provided. Answer sections Bl and B2 in separate answer booklets.(ALL ON LINE)

LECTURER/UNIT COORDINATOR:

Maria Estela Varua/ Anna Evangelista

TIME ALLOWED:

3 hours

I TOTAL PAGES:

132

RESOURCES ALLOWED

DO NOTTAKE THIS PAPER FROM THE EXAM ROOM Revision

Page 1

PART A : MULTIPLE CHOICE QUESTIONS Fill in the letter on the scan sheet that best correspond to your answer to each of the following questions. Each question in this part is worth 0.5 marks. The total mark for this part is 1O marks.

1) If series y and z have similar stochastic trends, but are otherwise unrelated, they are said to be a. Cointegrated b. Cotrending c. Converging d. Jointly stationary.

2) What is a spurious regression? a. Statistically significant but meaningless results generated by regression analysis of non-stationary data b. The results generated by regression analysis of a station variable dependent on a non-stationary series c. Regression analysis where endogenous and exogenous variables are reversed d. Regression analysis that is impossible due to lack of identification.

3) A model estimated using a dataset with 125 observations generates the following results.

Variable

X2 X3 X4 Xs Constant

Revision

-0.01264 0.595792 1.124589 0.323742 8.86016

Std. Error

t-stat

P>ltl

0.005519 0.014482 0.877192 0.060709 1.766116

-2.28937 41.13934 1.282032 5.332661 5.016749

0.022 0.000 0.200 0.000 0.000

Page 1

What calculated test statistic would you use to test the hypothesis betas=0.25?

a. 1.2147 b. 5.3327 C.

1.2948

d. 0.0607

If your regression results show a high R2

4)

,

adj R2 and a significant F-test, but ,

low t values for the coefficients, what is the most likely cause? a. Omitted relevant variables b. Irrelevant variables included c. Collinearity d. Heteroskedasticity

5) You estimate 4 different specifications of an econometric model by adding a variable each time and get the following results

Model A ModelB Model C Model D

R2

adj R2

AIC

0.3458 0.3689 0.4256 0.4299..

0.3285 0.3394 0.3916 0.3911

22.56 22.37 21.21 21.79

Which model appears to be correctly specified?

a. A b. B C.

C

d. D

There are 20 questions in this section

END OF PART A

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SECTION 81: SHORT ANSWER QUESTIONS AND EMPIRICAL QUESTIONS

You need to answer three (3) of the four (4) questions in this section. The mark for each question is indicated. The total mark for this part is 15 marks. All answers must be written in the answer booklet provided.

Question 1: (5 marks)

OLS Assumptions –which one is violated?

Question 2: (5 marks)

OLS Assumptions – which one?

Question 3: (5 marks)

Functional Form Question 4: (5 marks)

Unit Root Tests

END OF SECTION B1

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Page 3

SECTION 82: COMPUTER ANALYSIS Answer ALL questions in this section. The total mark for this part is 25 marks. All answers must be written in the answer booklet provided.

Reminder: When performing statistical tests, always state the null and alternative hypotheses, the test statistic, decision rule and the conclusion of the test. A financial analyst wishes to test the relationship between GNP and foreign earnings from developing countries. Theoretically, growth should be higher for those countries with a high foreign income and is external to the local economy. The two sources most readily measured are foreign direct investment and earning from exports. Use Appendix A to answer the following questions. GNP is in billion dollars while all other variables are

expressed in million dollars.

(see APPENDIX A output for the questions in this SECTION)

a) Discuss the characteristic of the data by making reference to the lower subscript. b) What signs would you expect on Beta2 and Beta3 ? Why? c) Report the least squares estimates of the coefficients and corresponding pvalues. d) Are the signs of the estimated coefficients in accord with economic theory? Give the interpretation to the estimates for Beta2 and Beta 3• e) Determine whether the estimated coefficients are statistically significant at the 1% level of significance. f) Test for the overall significance of the model at 5% level of significance. Interpret the meaning of the coefficient of determination. g) Conduct diagnostic tests to check whether the model satisfies the assumptions of OLS and discuss your results. h) Conduct Stationarity test on variables and discuss your results.

END OF SECTION B2

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Appendix A tm

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I I

_/ /_/

_/ /_/

I I

10.0

Statistics/DataAnalysis special Edition

copyright1984-2008 statacorp 4905 Lakeway Drive college Station, Texas 77845 USA 800-STATA-PC http://www.stata.com 979-696-4600 [email protected] 979-696-4601 (fax)

20-userStataforWindows(network) perpetual license: Serial number: 81910524292 Licensed to: school of Economics andFinance university of Western sydent Notes:

1. 2.

(/m#optionor-setmemory-)10.00MBallocated todata (/v#optionor-setmaxvar-) 5000maximumvariables 3. New update available; type -updateall. insheet using "E:\My Documents\Teaching\FM2009\Exercises\sessi on\ForeignEarni ngs.txt" (4 vars, 25 obs) tsset obs time variable: obs, 1to 25 delta: 1 unit summarize gnp directforeigninvestment exports variable

Obs

Mean

Std. Dev.

Min

Max

gnp directfore~t exports

25 25 25

124.2 142.64 256.72

111.4342 98.36026 189.4172

11 22 44

451 388 723

regress gnp directforeigninvestment exports source

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55

df

MS

Model Residual

255393.33 42628.6696

2 127696.665 22 1937.6668

Total

298022

24 12417.5833

gnp

coef.

directfore~t exports _cons

-.001395 .545196 -15.56372

std. Err. .1593158 .0827292 15.94247

t

-0.01 6.59 -0.98

Number ofobs 22) F( 2, Prob> F R-squared AdjR-squared = Root MSE P>ltl

[95%conf.

0.993 0.000 0.340

-.3317957 .3736261 -48.62639

25 65.90 0.0000 0.8570 0.8440 44.019 Interval] .3290056 .7167659 17.49894

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. estathettest Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: constant variance

Variables: fitted values ofgnp chi2(1) Prob > chi2

11.94 0.0005

es tat vi f variable

VIF

1/VIF

directfore~t exports

3.04 3.04

0. 328784 0. 328784

MeanVIF

3.04

es tat hettest, ii d

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity Ho: Constant variance

variables: fitted values ofgnp chi2(1) Prob > chi2

8.46 0.0036

. estat dwatson

Durbin-Watson d-statistic( 3,25)

1. 215631

=

. correlate directforeigninvestment exports (obs=25)

Dickey-Fuller test for unit root

Number of obs

---

5 Cnt1cal

value

Stat1st1c

z (ti

Interpolated Dickey-Fuller ---

H Critical

Test

-5 .137

Value

-4 .159

MacKrnnon approximate p-value for Z(t)

-3.501

10% Critical

Value -3.182

0.0001

. predict error, ,;b s>;test error Skewness/Kurtosis tests for Normality --JOINT --

Van able

Qbs

error

50

Revision

PrlSkewnessl

0.0007

Pr(KUrtOSlS)

0.1770

adJ ch12121

10.91

Prob>Chl2

0.000

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, summarize error, detail Linear prediction Percentiles

Smallest

1\

8.39421

8.39421

S!

14.88495

8.39421

10%

25.2339

14.88495

Obs

so

25%

50.79673

14.88495

Sum of Wgt.

50

50\

98.7405

Largest 75!

171.47ll

353.7814

90!

JJS.0458

151.7814

95!

351.7814

178.0717

99!

178.0717

378.0717

Mean Std. Dev. Variance Skewness Kurtosis

124.2 102.0991

10424.22 1.26024 3. 700641

END OF APPENDIX A

All the best.

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