Assume that you have been hired by the Ministry of Health of Malaysia to study the determinants
Question:
Assume that you have been hired by the Ministry of Health of Malaysia to study the determinants of smoking behavior and that you estimate the following cross-sectional model based on data for all 13 states and 3 federal territories (standard errors in parentheses):
(3.0)(1.0)(0.04)(1.0)(0.5)
t =- 3.0 1.0-1.0- 3.03.0
R2 = .40N=16
where:Ci = the number of cigarettes consumed per day per person in the ith state/federal territory
Ei = the average years of education for persons over 21 in the ith state/federal territory
Ii= the average income in the ith state/federal territory (thousands of dollars)
Ti = the tax per package of cigarettes in the ith state/federal territory(cents)
Vi = the number of video ads against smoking aired on the three major networks in the ith state/federal territory
Ri= the number of radio ads against smoking aired on the five largest radio networks in the ith state/federal territory
(i)Develop and test (at the 5-percent level) appropriate hypotheses for the coefficients of the variables in this equation.
(ii)Do you appear to have any irrelevant variables?Do you appear to have any omitted variables?Explain your answer.
(iii)Let's assume that your answer to part (ii) was yes to both.Which problem is more important to solve first -irrelevantor omitted variables?Why?
(c)Describe and explain spurious regression, and its impact on the regression results.Fundamentals of Financial Accounting
ISBN: 978-1259103292
4th Canadian edition
Authors: Fred Phillips, Robert Libby, Patricia Libby, Brandy Mackintosh