3 a) Outline the setup of the Logit model for binary dependent variables. [35 marks] b)...

   

Transcribed Image Text:

3 a) Outline the setup of the Logit model for binary dependent variables. [35 marks] b) Explain why the conventional R-square index is not a valid measure to evaluate the goodness-of-fit of the Logit model. Discuss which other measures of model fit should be used instead. [15 marks] c) We estimate a regression describing the relationship between the cost per student and related factors at four-year colleges in the U.S., covering the period 1987 to 2011, where Intc is the logarithm total cost per student, ftestu is the number of full time equivalent students, ftgrad is the number of full-time graduate students, tt is the number of tenure track faculty per 100 students, GA is the number of graduate assistants per 100 students, and CF is the number of contract faculty per 100 students, which are hired on a year to year basis. One of the test results in our analysis is as follows: .hausman fixed ftestu ftgrad tt (1) ga cf Coefficients (ii) (b) fixed (8) .8144496 -.0825432 .8427547 .6781897 .8794352 .8946176 .8326292 .8321987 .8236949 .8355894 (b-B) Difference Test: Ho: difference in coefficients not systematic chi2(5) - (b-8) [(V_b-v B)^(-1)](b-B) 388.47 8.0000 Probxchi2= .8169927 -.835435 -.8151824 .8004305 -.8118944 sqrt(diag(V_b-V_B)) S.E. b = consistent under Ho and Ha; obtained from xtreg B-inconsistent under Ha, efficient under Ho; obtained from xtreg .8012546 .8018868 Explain what this test is used for, and explain what you can learn from the result of the test. [10 marks] Explain the differences between fixed effects model and random effects model. [25 marks] (iii) Describe what heteroscedasticity is, and discuss what the consequences of the presence of heteroscedasticity are for linear regression analysis. [15 marks] Total [100 marks] 3 a) Outline the setup of the Logit model for binary dependent variables. [35 marks] b) Explain why the conventional R-square index is not a valid measure to evaluate the goodness-of-fit of the Logit model. Discuss which other measures of model fit should be used instead. [15 marks] c) We estimate a regression describing the relationship between the cost per student and related factors at four-year colleges in the U.S., covering the period 1987 to 2011, where Intc is the logarithm total cost per student, ftestu is the number of full time equivalent students, ftgrad is the number of full-time graduate students, tt is the number of tenure track faculty per 100 students, GA is the number of graduate assistants per 100 students, and CF is the number of contract faculty per 100 students, which are hired on a year to year basis. One of the test results in our analysis is as follows: .hausman fixed ftestu ftgrad tt (1) ga cf Coefficients (ii) (b) fixed (8) .8144496 -.0825432 .8427547 .6781897 .8794352 .8946176 .8326292 .8321987 .8236949 .8355894 (b-B) Difference Test: Ho: difference in coefficients not systematic chi2(5) - (b-8) [(V_b-v B)^(-1)](b-B) 388.47 8.0000 Probxchi2= .8169927 -.835435 -.8151824 .8004305 -.8118944 sqrt(diag(V_b-V_B)) S.E. b = consistent under Ho and Ha; obtained from xtreg B-inconsistent under Ha, efficient under Ho; obtained from xtreg .8012546 .8018868 Explain what this test is used for, and explain what you can learn from the result of the test. [10 marks] Explain the differences between fixed effects model and random effects model. [25 marks] (iii) Describe what heteroscedasticity is, and discuss what the consequences of the presence of heteroscedasticity are for linear regression analysis. [15 marks] Total [100 marks]

Answer rating: 100% (QA)

Here is my attempt at answering the questions a The Logit model aka logistic regression model is used for binary dependent variables that take the val... View the full answer