Consider the multiple regression model Y; = B1 + B2Xr2*B3X-3 + e; %3D
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Question
The first independent variable (Xt2) will be a cubed value of the rate of return on individual companies. Is the inclusion of this variable consistent with the assumptions of the simple linear regression model?
Explain your answer
b. What is the additional assumption for this time-series model that does not apply to a cross-sectional analysis?
c. If you suspected that your dependent variable Y was not stationary, explain the three unit root processes that you could test for.
d. What does the letter "t" represent in the model?
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