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Econometrics Exam for Actuarial Science

This document contains instructions for an econometrics exam for second year bachelor's students in actuarial science at Multimedia University of Kenya. It lists four compulsory questions. Question 1 has three parts asking students to define econometrics, differentiate between panel and time series data, and estimate a linear demand function from sample data. Question 2 defines regression and asks students to explain heteroscedasticity, multicollinearity, and autocorrelation. Question 3 asks about the assumptions of ordinary least squares regression and calculates a sample correlation coefficient. Question 4 defines a regression model and asks students to explain the error term and discuss properties of ordinary least squares estimators.

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43 views2 pages

Econometrics Exam for Actuarial Science

This document contains instructions for an econometrics exam for second year bachelor's students in actuarial science at Multimedia University of Kenya. It lists four compulsory questions. Question 1 has three parts asking students to define econometrics, differentiate between panel and time series data, and estimate a linear demand function from sample data. Question 2 defines regression and asks students to explain heteroscedasticity, multicollinearity, and autocorrelation. Question 3 asks about the assumptions of ordinary least squares regression and calculates a sample correlation coefficient. Question 4 defines a regression model and asks students to explain the error term and discuss properties of ordinary least squares estimators.

Uploaded by

Oscar Oyakapel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MULTIMEDIA UNIVERSITY OF KENYA

FACULTY OF BUSINESS AND ECONOMICS


UNIVERSITY EXAMINATIONS 2018/2019
SECOND YEAR SECOND SEMESTER SPECIAL /SUPPLEMENTARY
EXAMINATION FOR THE DEGREE OF BACHELOR OF SCIENCE IN
ACTUARIAL SCIENCE
BEC 2217: ECONOMETRICS 1
DATE: TUESDAY 24TH SEPTEMBER, 2019 TIME: 2 HOURS
INSTRUCTIONS:
ANSWER YOUR QUESTIONS IN THE ANSWER BOOKLET PROVIDED.
ANSWER QUESTION ONE [COMPULSORY] AND ANY OTHER TWO QUESTIONS
QUESTION ONE [ THIRTY MARKS]
a) Define econometrics and discuss the classical methodology of econometrics
[10 marks]
b) Differentiate between panel data and time series data
[4 marks]
c) The following table gives the quantity of commodity, Y and price X for the years
1961-1970

Years Y X
1961 770 20
1962 785 16
1963 790 16
1964 795 15
1965 800 12
1966 805 10
1967 810 10
1968 820 7
1969 840 9
1970 850 6
i. Estimate the linear demand function
[4marks]
ii. Calculate the price elasticity of demand

1
[4 marks]

iii. Find the explained variations in Y, the level of correlation and interpret
[4 marks]

QUESTION TWO [TWENTY MARKS]


a) Explain the meaning of regression
[2 marks]
b) Define the following terms and consequences and remedies of each of the term
i. Heteroscedasticity
[6 marks]
ii. Multicollinearity
[6 marks]
iii. Autocorrelation
[6 marks]

QUESTION THREE [TWENTY MARKS]


a) Discuss the key assumptions of OLS
[10 marks]
b) The following data relates to the sales and profit of ABC Company limited over 10
years.
Time in
years 1 2 3 4 5 6 7 8 9 10
Sales in
Ksh.000's 10 20 30 40 50 60 70 80 90 100
Profit in
Ksh.000's 2 3 5 7 8 9 11 12 14 19

Calculate the sample correlation coefficient between sales and profit


[10 marks]
QUESTION FOUR [TWENTY MARKS]
A regression model is given as
Y = β1 + β 2 X + μ

a) Define μ and explain why we include it in a regression model


[10 marks]
b) Discuss the properties of OLS estimator and explain why it is the most desired
estimator
[10 marks]

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