Find the critical values of the appropriate test statistic in the following two

ID: 3179617 • Letter: F

Question

Find the critical values of the appropriate test statistic in the following two situations:

a. Testing for statistical significance (at 10% significance level) of the individual regression coefficients in the model,

Y = a + bX + cZ + dR, which is estimated using a time-series sample containing monthly observations over a two-year period.

b. Testing the statistical significance (at the 5 percent significance level) of the overall

regression equation,

Z = a + bY + cX,

which is estimated using cross-section data on 21 firms.

(a)

Here we have 4 variables and 24 data values (24 months in 2 year) so degree of freedom of t test used to test significance of coefficient is

df =n-4 = 24-4 = 20

Test will be two tailed so critical value of t for 10% significance level are +/- 1.7247.

(b)

Here F test will be used.

Number of variables: k = 3

Number of observations: n=21

Degree of freedom of numerator: df1 = 3-1 = 2

Degree of freedom of denominator: df2 = 21-3=18

So critical value of F for 5 percent significance level is

F-critical = 3.5546

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