The file FISH.RAW contains 97 daily price and quantity observations on fish prices at the Fulton Fish Market in New York City. Use the variable log(avgprc) as the dependent variable.
(i) Regress log{avgprc) on four daily dummy variables, with Friday as the base. Include a linear time trend. Is there evidence that price varies systematically within a week?
(ii) Now, add the variables wave 2 and wave3, which are measures of wave heights over the past several days. Are these variables individually significant? Describe a mechanism by which stormy seas would increase the price of fish.
(iii) What happened to the time trend when wave2 and wave3 were added to the regression? What must be going on?
(iv) Explain why all explanatory variables in the regression are safely assumed to be strictly exogenous.
(v) Test the errors for AR( 1) serial correlation.
(vi) Obtain the Newey-West standard errors using four lags. What happens to the t statistics on wave! and wave3! Did you expect a bigger or smaller change compared with the usual OLS t statistics?
(vii) Now, obtain the Prais-Winsten estimates for the model estimated in part (ii). Are wave 2 and wave 3 jointly statistically significant?