(***Round all the answers and intermediate calculations to two decimal places***) Question 1 (50 Marks) The...
(***Round all the answers and intermediate calculations to two decimal places***) Question 1 (50 Marks) The marketing manager of a local convenience store chain is conducting an investigation of the price effects of Brand A (P) and its competitor (Ps) on the quantity sold of Brand A beer in year 2016. The following model has been estimated: Sale_4 - Be + B,PA+BP3 + e for a sample of 52 weekly observations. Sale 4: number of bottles of Brand A sold during a week PA average price per bottle of Brand A during a week in $ Ps: average price per bottle of Brand B during a week in s The Ramsey's RESET test results are as follows: Auxiliary regression for RESET specification test OLS, using observations 1-52 Dependent variable: SALE A coefficient std. error t -ratio p-value const -67780.9 889.720 -136.590 52430.9 693.441 141.325 -1.293 1.283 -0.9665 0.2024 0.2058 0.3387 SALE_4 0.000491 0.000250 1.960 0.0559 -1.859 0.0694 SALE 4 -2.21782e-08 1.19330-08 Null hypothesis: specification is adequate Test statistic: F047) - 1.97994 with p-value-P( F 4 > 1.97994) -0.149428 (a) Discuss the purpose of conducting a Ramsey's RESET test. (15 marks) (b) Explain the procedure of the auxiliary regression for RESET test and discuss the test results of the above table. (35 marks) Question 2 When using N-50 observations to estimate the model: Y = B. + B2X1 + B3X2 + e You obtain SSE=2132.65 and sy = 2)2 = 9.8355. a) Find SST. (10 marks) b) Explain why SSE for the restricted model is the SST in part (a). (10 marks) c) Find the value of the F-statistic for testing Ho:B2 = 0,B3 = 0. Do you reject or fail to reject Ho at a 1% level of significance? (30 marks)