University of Phoenix OLS Assumption and Regressors Econometric Paper Please go through the attached screenshot and answer the questions on the documents.

University of Phoenix OLS Assumption and Regressors Econometric Paper Please go through the attached screenshot and answer the questions on the documents. This is econometric and 1. (18 points overall) Answer yes or no to each of the items (a)-(c). If yes, briefly justify the statement, if no,
provide a counter-example or disprove the statement.
(a) (6 points) We have a sample of n individuals, indexed by i = 1,…, n. For the i-th individual, we can
observe X; and Y?. If we assume our sample is i.i.d. cross-sectionally, it implies Xi and Y? are independent
with each other.
(b) (6 points) In multivariate OLS, we have three regressors X1, X2, X3. If (X1, X2), (X1, X3), and (X3, X2)
are not perfectly correlated, then we do not have the perfect multicollinearity.
(c) (6 points) T-test is still valid when OLS assumption 1 correct specification is violated.
2. (30 points overall) You are interested in understanding the effect of maternal smoking on baby’s birthweight.
As such, you have collected data on 36600 mother. Your dataset includes the following variables:
• birthweight – the baby’s birthweight in kilogram
1
• smoke – 1 if the mother smokes and 0 otherwise.
• drink – 1 if the mother drinks and 0 otherwise.
• race – 1 if the mother is black and 0 otherwise.
weight – mother’s weight in kilogram
We will maintain the OLS assumptions throughout this problem. You estimate the following regression
using OLS:
birthweight
Bo + Bismoke + Burace + B3drink + Basmoke * drink + B5 log(weight) + U.
You obtain the following estimation results:
birthweight = 3 -0.25smoke + 10 race – .1 drink – .05 smoke * drink – 3.5 log(weight)
(.01) (.05)
(.07) (.04)
(.02)
(-7)
(a) (5 points) What is the interpretation of B5 in this multivariate regression?
(b) (5 points) You want to test that there is no effect of smoking on baby’s birthweight. Write down your
Ho and H? in terms of (Bo,… , B5).
(c) (5 points) You choose to use F-test to conduct the above test and obtain a F-stat of 4. Based the
Chi-square table, is the P-value of your F-test less than 1%, between 1% and 5%, or greater than 5%,
and why?
(d) (5 points) A mother drinks but does not smoke. Her weight is 70 KG. What is the expected change
of her baby’s birthweight (in terms of B1,., ,B5) if she starts to smoke and gain 1.4 kg of weight, given
other variables unchanged?
(e) (5 points) Based on the regression results, what is a valid estimate (number) of the above expected
increase?
(f) (5 points) In order to construct the confidence interval for the expected increase, you will run a F-test
to recover the standard error of the estimator of the expected increase you proposed above. What is the
null hypothesis of the F-test you are going to run?

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