INTRODUCTION TO ECONOMETRICS II ECO 306 NOUN 33 Variance and covariance concepts as statistical tools are discussed in this unit. How they are estimated were also explained using some basic covariance and variance rules. The existence of population covariance and sample variance estimations were briefly introduced. The introductions and discussions of these two concepts point out that variance can be considered as a special case of covariance.
1.2.6.0 TUTOR-MARKED ASSIGNMENT 1.) Ina large bureaucracy the annual salary of each,
Y,
is determined by the formula Where,
S is the number of years of schooling of the individual and
T is
the length of time, in years, of employment.
X is the individuals age. Calculate Cov(
X,
Y), Cov(
X,
S), and Cov(
X,
T) for the sample of five individuals
shown below and verify that ( ) ( ) ( )
2.) Ina certain country the tax paid by a firm,
T,
is determined by the rule Where,
P is profits, and
I is aninvestment, the third term being the effect of an investment incentive.
S is sales. All variables are measured in $ million at annual rates. Calculate Cov(
S,
T), Cov(
S,
P), and Cov(
S,
I) for the sample of four firms shown below and verify that
( ) ( ) ( )
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