Suppose you have the following regression model:

Y = ?0 + ?1X1 + ?2X2 + ?

where Y represents the dependent variable, X1 and X2 represent two independent variables, ?0, ?1 and ?2 are the parameters, and ? is the error term.

You estimate the model using ordinary least squares (OLS) and obtain the following results:

Y = 10 + 2X1 + 3X2 + ? R2 = 0.8 n = 50 s.e.(?1) = 0.5 s.e.(?2) = 0.3

(a) Interpret the coefficient estimates of ?1 and ?2 in the context of the model.

(b) Test the null hypothesis that ?1 = 0 at the 5% significance level. State your conclusion and show all calculations.

(c) Test the null hypothesis that ?2 = 0 at the 1% significance level. State your conclusion and show all calculations.

Answer rating: 100% (QA)

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