ECON339 Applied Financial Modelling

ECON339 Applied Financial Modelling

Tutorial Questions Week 2

1.)

Solve “Self-Study Questions” in chapter 1, page 27 of the textbook.

Questions 1., 2., 4

Solve the following hypothesis test problems (hint: use the t-tables in the document

“Formulas and Tables” as the reference guide for computing the critical value)

2.)

Sample size: 32 significance level: 5%

Model: y=alpha + beta*x

Alpha: 23.56 SE(alpha): 11.02

Beta: 2.23 SE(beta): 1.87

1. a) Test for H0: beta=0
2. b) Test for H0: beta=3

3.)

Sample size: 32 significance level: 5%

Model: y=alpha + beta*x

Alpha: 23.56 SE(alpha): 11.02

Beta: 2.23 SE(beta): 1.05

1. a) Test for H0: beta=0

 Why are the results for both models different? What is the difference of the model? Why does it play

a role?

4.)

Sample size: 82 significance level: 5%

Model: y=alpha + beta*x

Alpha: 13.65 SE(alpha): 4.45

Beta: 6.82 SE(beta): 3.98

1. a) Test for H0: beta=0
2. b) Compute the confidence interval

 What does the CI tell us? Did we already see this coming when we tested for significance of beta?

5.)

Sample size: 102 significance level: 5%

Model: y=alpha + beta*x

Alpha: 14.62 SE(alpha): 4.23

Beta: 3.67 SE(beta): 1.589

1. a) Test for H0: beta=0

Sample size: 102 significance level: 1%

Model: y=alpha + beta*x

Alpha: 14.62 SE(alpha): 4.23

Beta: 3.67 SE(beta): 1.589

1. b) Test for H0: beta=0

 Why are the results for both models different? Why does it play a role?