We are researching the charity donation behaviour of Australians. We have the following model: (E1) Donate = β0 + β1Income +β2Avg_Gift + β3Edu + u Where: Donate is a dummy variable equal to 1 if the individual makes a donation in response to a social media campaign by our charity organisation, and 0 otherwise Income is the annual household income Avg_Gift is the average value of past donations made by the individual to our charity Educ is the individual's level of education (in years) Our data is a random sample of the population and we have 1,614 observations. You should assume E [u | Income, Avg_Gift, Educ] = 0. Using the information above, please answer the following 3 questions. [i] Referring to Model (E1) above, interpret the coefficient β1.  [ii] You know that this model will suffer from heteroskedasticity. Why is this the case? Explain your reasoning.  [iii] In your own words, what is heteroskedasticity?

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
icon
Related questions
Question

We are researching the charity donation behaviour of Australians. We have the following model:

(E1) Donate = β0 + β1Income +β2Avg_Gift + β3Edu + u

Where:

  • Donate is a dummy variable equal to 1 if the individual makes a donation in response to a social media campaign by our charity organisation, and 0 otherwise
  • Income is the annual household income
  • Avg_Gift is the average value of past donations made by the individual to our charity
  • Educ is the individual's level of education (in years)

Our data is a random sample of the population and we have 1,614 observations. You should assume E [u | Income, Avg_Gift, Educ] = 0.

Using the information above, please answer the following 3 questions.

[i] Referring to Model (E1) above, interpret the coefficient β1. 

[ii] You know that this model will suffer from heteroskedasticity. Why is this the case? Explain your reasoning. 

[iii] In your own words, what is heteroskedasticity? 

Expert Solution
steps

Step by step

Solved in 4 steps with 2 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman