Econometrics - Midterm Exam

(1) In Regression Yi = β0 + β1 Xi + ui : find the estimated intercept (β0 ) and the estimated slope (β1 ).
(2) Find the predicted values for each observation.
(3) Find the residuals for each observation.
(4) Find an adjusted R2 . Interpret the number in this adjusted R2

Part-II
Suppose that the tuition of your college has once again gone up, and you are interested in what
determine cost of attending college. In this investigation, you collect data randomly for 100 national
universities and liberal arts colleges from the 2008-2009 U.S. News and World Report annual rankings.
Then, you run 3 regressions and the results are shown in Table 1.
In Table 1, Cost is tuition, textbook cost, etc., including living cost in dollars, Reputation is the index
used in U.S. News and World Report (based on a survey of university presidents and chief academic
officers), which ranges from 1 (’marginal’) to 5 (’distinguished’), Size is the number of undergraduate
students, and Dpriv , Dlibart, and Dreligion are binary variables indicating whether the institution
is private, a liberal arts college, and has a religious affiliation, i.e. Dpriv = 1 for private college, 0
otherwise. Dlibart = 1 for liberal art college, 0 otherwise. Dreligion = 1 for religion-affiliated college,
0 otherwise.
Numbers in parentheses are homoskedasticity-only standard errors.
(1) Which regression has the best fit to the sample? Why?

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