[Note: The assignment will be discussed in lab this week, and will be due in lab next week.]

Economics 421/521

Winter 2011

Homework #3

1. Using the first model of heteroskedasticity, i.e. that resid^{2} = α_{0} + α_{1}*years + α_{2}*years^{2}, correct the salary model in problem 3 from Homework 2 for heteroskedasticity and reestimate.

2. Problem 7.2 in the text.

3. Test the salary model in problem 3 from Homework 2 for heteroskedasticty using White's test. Correct the standard errors using White's correction. How do the coefficients and corrected standard errors compare to those obtained in problem 3 of Homework 2?

4. What are the consequences of estimating an autoregressive model using OLS?

[Note: pdf of problems 7.1 and 7.2, problem 7.1 was on the last homework.]

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