QUESTION THREE Model comparison is very important in econometric analysis. Mr Homoscedasticity Mbewe, a Senior Researcher at the Ministry of Finance was conducting an analysis into factors that influence consumer loan default in Zambia. He obtained the following restricted model (model 1): Variable P-value Age Income Marital status 0.08 0.05 0.01 ii) Coefficient 0.03 0.08 0.10 Model 2: The unrestricted model has additional variables of 'Employment status' with 0.31 P-value and -0.08 coefficient value; and 'Financial literacy' with 0.23 p-value and 0.013 coefficient value. The sample size (n) of his study was 542 and he used 5% level of significance in his estimation. The RSS value of the unrestricted model is 2023.61 i) AIC BIC Adjusted R-squared Model Values R-squared=0.66 ESS-3973 Using the F-test, demonstrate how Mr. Homoscedasticity can conduct his model comparison (between restricted and the unrestricted models). Given the information below, comment on the model fit and compare your conclusions to those under the F-test conducted in (i) Criteria Model 1 Model 2 4020.12 4068.53 4055.08 4157.82 0.68 0.64

QUESTION THREE Model comparison is very important in econometric analysis. Mr Homoscedasticity Mbewe, a Senior Researcher at the Ministry of Finance was conducting an analysis into factors that influence consumer loan default in Zambia. He obtained the following restricted model (model 1): Variable P-value Age Income Marital status 0.08 0.05 0.01 ii) Coefficient 0.03 0.08 0.10 Model 2: The unrestricted model has additional variables of 'Employment status' with 0.31 P-value and -0.08 coefficient value; and 'Financial literacy' with 0.23 p-value and 0.013 coefficient value. The sample size (n) of his study was 542 and he used 5% level of significance in his estimation. The RSS value of the unrestricted model is 2023.61 i) AIC BIC Adjusted R-squared Model Values R-squared=0.66 ESS-3973 Using the F-test, demonstrate how Mr. Homoscedasticity can conduct his model comparison (between restricted and the unrestricted models). Given the information below, comment on the model fit and compare your conclusions to those under the F-test conducted in (i) Criteria Model 1 Model 2 4020.12 4068.53 4055.08 4157.82 0.68 0.64

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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