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MN-1509 Econometrics 1: Assignment 1
This assignment is an individual assignment counting towards 15% of the overall module
mark. This assignment must be submitted by 3pm on Friday 20th March 2015 via Turnitin.
Marks and related feedback is to be released within 3 weeks from the submission date. The
School of Management operates a late penalty system as follows: when work is submitted
late with no prior authorisation, a penalty of 10% will be deducted from the actual mark for
each calendar day, or part of a day, by which the deadline is exceeded. After seven days
from the initial deadline, a mark of zero will be awarded. Late work should be submitted
electronically in the usual way.
A copy of the School’s Assignment Cover Sheet should also be completed and included at
the front of your work, along with a word count for your assignment. Failure to include a word
count will be penalised as explained in your student handbook. The maximum word count for
this assignment is 3000 words, excluding references, footnotes, tables, graphs and figures.
An extension to the submission date for coursework can be granted by the Extenuating
Circumstances Committee where an application is made in advance of the due date. All
applications must be supported by independent evidence e.g. medical circumstances must
be supported by a doctor’s certificate. Computing failure is not considered to be an
extenuating circumstance, and nor is pressure of work. Students are expected to make
backup copies of their work, manage their time efficiently and to meet deadlines. Please see
the School’s policy on Extenuating Circumstances for more information. Details of how to
make a claim for extenuating circumstances are available from the Client Experience Office
– e-mail SoMSupport@swansea.ac.uk
You can expect to receive feedback on your work within 3-weeks of the submission
deadline. All feedback for the coursework assignment will be provided through GradeMark.
Marks will be made available via Grade Centre in Blackboard and your university student
portal. Please note that all marks are provisional until they have been ratified by a
progression or award board and are therefore subject to change.
Question 1
Foodexp.xls gives data on expenditure on food and total expenditure measured in $, for a
sample of 55 households in USA for a recent period. Using this data, perform the following
tasks (using EVIEWS)
(a) Import these data into an EVIEWS work file. Plot the data on food expenditure and total
expenditure, and sketch a regression line through the scatter plots.
(20 marks)
(b) Regress food expenditure on an intercept and total expenditure. Comment on the R
square and the adjusted R square of this regression.
(20 marks)
(c) Comment on the F statistic of this regression as well as the t ratio for the significance of
the coefficient of total expenditure.
(20 marks)
(d) Create the logarithmic transformation of the two variables (food expenditure and total
expenditure) (call the resulting variable lnfood and lntotal respectively).Graph lnfood and
lntotal together and comment on the graph.
(20 marks)
(e) Regress lnfood on intercept and lntotal. Test whether the coefficient of lntotal is 1 using a
t test.
(20 marks)
You must provide EVIEWS output incorporated in your MS-Word document and fully explain
your actions and findings by commenting on the provided EVIEWS output directly.
Question 2
Consider the following regression results (estimated standard errors in parentheses) based
on data from a local cinema obtained at a monthly frequency over a two year period (n=24).
(1.03) (0.16) (0.10)
ln ˆ 1.54 0.76ln 0.30ln
2 3
? ? ?
Y X X t t t
where Yt = quantity of ‘hot-dogs’ demanded;;
X2t= price of ‘hot-dogs’;;
X3t=price of nachos;
R2=the coefficient of determination; and
ln= the natural logarithm of a variable.
(a) Comment on the economic interpretation that can be given to the estimates attached to
lnX2t and lnX3t and consider whether these estimates suggest hot-dogs and nachos are
substitutes or complements.
(40 marks)
(b) Comment on the statistical significance of each of the estimated coefficients at the 5 and
10 per cent levels. (30 marks)
(c) Use an F-test to test the statistical significance of the regression model, i.e., test whether
the population parameters attached to lnX2t and lnX3t are jointly equal to zero.
(30 marks)
You must provide EVIEWS output incorporated in your MS-Word document and fully explain
your actions and findings by commenting on the provided EVIEWS output directly.

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