AQRM Exercise Lecture

Week 16

Rabeya Khatoon
Office: 1.04, 25-27 Belgrave Road
Office Hours: Mondays 10.30 to 11.30, 13.30 to 14.30
• Go to www.responseware.eu

• Enter session ID as AQRMEL2

Do you prefer to continue the
exercise lectures with the Turning
Point quiz style?

A. Yes
B. No
 Exercise 1
a) How would we test the hypothesis that the
coefficient on the variable rooms is zero using a
5% significance level?

A. Using t-ratio
B. Using 90% confidence interval
C. Using p-value < 0.01
D. All of the above
What are the null and the alternative
hypothesis for part (a)?

• 

A. 0
Do you reject the null hypothesis
that the coefficient of the variable
‘rooms’ is zero?

A. Reject at 5% level
B. Don’t reject at 5% level
C. Accept at 5% level
b) If p value is less than 0.01 what does that
imply? The coefficient is statistically significant at

A. 5% level
B. 10% level
C. 95% level
D. 1% level
c) If the 99% CI for rooms coefficient is , do
 you reject the null at 1% level?

A. Yes, as the null value 0 is out

of the CI
B. No, as the estimate 9119.5 is
within the CI
C. Need more information
Exercise 2
••  Suppose that, in a regression, we know that the null represents the
true population association (e.g. ).
• If we were to draw 100 samples of the population and estimate the
model of interest on each sample, we will get 100 different
estimates for .
If we use a 5% significance level (), how many null
 hypotheses (e.g. ) do we expect to incorrectly reject?

A. 95%
B. 5%
C. 1%
D. Don’t know
Exercise 3

• A researcher is interested in estimating a demand function for daily

cigarette consumption. He collects a random sample of 807 US adults
and obtains these estimates:
(a) How do we interpret the
intercept?
A. The average daily number of
cigarettes smoked for
individuals with all control
variables equal to zero
B. The average daily number of
cigarettes smoked
b) Is the coefficient on cigprice statistically
significantly different from zero at the 5% level?

A. Yes, based on 95% CI

B. No, based on t-ratio
C. Yes, based on p-value
 c) How do we interpret the coefficient on
restaurn?

A. Increasing restaurn by one unit

reduces cigs by 2.75
B. Individuals with ‘restaurn’ on
average smoke 2.75 cigarettes
less per day compared to those
without
(d) How do we interpret the coefficient on
educ? All else equal,
A. years of schooling reduces by
0.24 if 1 more cigarette smoked
B. one more year of schooling is
associated with 0.24 fewer
cigarettes smoked per day
C. there is no statistically
significant association between
educ and cigs at 5% level
D. both B and C
e) Let's assume that we have reason to
believe that the coefficient on educ should be
equal to -1. Is it significantly different from -1
at the 5% level?

A. Yes
B. No
C. Don’t know