Assignment:
Question:
Use the data in POKIES to answer this question.
i) Estimate an equation that explains the EGM expenditures per adult for the fiscal year 2012/13 (exp_per_adult) in terms of the number of EGMs per 1000 adults in 2013 (EGMS) and the unemployment rate (unemployment_rate) for a sample of 70 LGAs from Victoria, Australia. Report the results using the usual standard errors in the usual form.
ii) Apply the full White test for heteroskedasticity. Using the chi-square form of the statistic, obtain the p-value. Also perform a Ramsey RESET test using 2 fitted values. Report the p-value and the F statistic for this test. What do you conclude?
iii) Add in a quadratic term for EGMS. Re-estimate the model. Report the results using the usual standard errors. Apply the full White test for heteroskedasticity. Using the chi-square form of the statistic, obtain the p-value. Also perform a Ramsey RESET test using 2 fitted values. Report the p-value and the F statistic for this test. What do you conclude?
iv) What does this example suggest about heteroskedasticity and the specification of the equation?