1. Please find the data wine on LMS. These data were reported in a ...

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1. Please find the data wine on LMS. These data were reported in a New York Times article, December 28, 1994. The dependent variables deaths, heart, and liver can be each regressed against alcohol as nice simple regression examples. The conventional wisdom is that wine is good for the heart but not for the liver, something that is apparent in the regressions. You can see these results by regressing heart and liver on alcohol separately. a) Regress liver on alcohol and report the results, especially the coefficient of alcohol. b) Now I want you to create a new variable called "alcoholnew" by multiplying alcohol with 10. Now similar to the previous regression, regress liver on alcoholnew and report the results. Compare the coefficients of alcohol and alcoholnew. Also compare the output tables of each regression to see what has changed and what has stayed the same when we change alcohol to alcoholnew. c) What can we conclude from results of part a and b? d) Again regarding the results in an and b, what can you say about a very small coefficient from a regression, say you found B = 0.007? Can you say that this is economically insignificant, or statistically insignificant? 2. Please find the data TR_US_daily on LMS. The Excel file contains daily stock returns from Turkey and the US (returns to price indices BIST100 and SP500). Returns to BIST100 is in TL terms and to SP500 is in USD terms. a) First let's check for simple predictability. For each return series run the following regression and test if B is statistically significant. How do you interpret your findings? = b) For the regressions above run Breusch-Pagan test of heteroscedasticity Do you find any evidence pointing heteroskedasticity? c) Independent of your findings in part b, assume that the regression with BIST100 returns had heteroskedas- ticity problem and fix it using FGLS. 3. For each of the cases below, please show whether the process satisfy 'strict exogeneity' and "contemporaneous exogeneity'. Making a claim for an answer is not enough, you need to show convincingly. a) Yt = a+ Boxt + B1Xt-1 + Et, where Et = pet-1 + Vt and Vt is an i.i.d. sequence with mean zero and unit variance. Assume that Et is independent of Xt and xt-1. b) Yt = a + Byt-2 + Ut, where Ut = put-1 + Vt. Vt is an i.i.d. sequence with mean zero and unit variance, and independent from yt-2-

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1. Please nd the data wine on LMS. These data were reported in a New York Times article, December 28, 1994. The dependent variables deaths, heart, and liver can be each regressed against alcohol as nice simple regression examples. The conventional wisdom is that wine is good for the heart but not for the liver, something that is apparent in the regressions. You can see these results by regressing heart and liver on alcohol separately.

A regression analysis was conducted to determine whether alcohol predicts liver disease deaths. The equation for the regression line is liver = 10.85 + 3.59*alcohol. Alcohol is positive and significant predictor of liver disease deaths (p = 0.000 < 0.05). If alcohol increases for one unit, liver disease death will increase for 3.59 deaths, while other conditions remain unchanged. The confidence interval of the slope ranged from 2.01 to 5.16, an interval which does not contain...

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