Answer True or False for the following questions. Justify your answer in one or

Question

Answer True or False for the following questions. Justify your answer in one or two sentences.

a. Dummy variables are used in the regression equation to test for differences in the slopes.

b. The presence of an outlier in the data used to fit a regression causes the estimated model to have a higher R2 than it should.

c. Interaction variables are used in the regression equation to account for differences in the intercepts as well as in the slopes.

d. In regression modeling, it is more important to fit a model that meets the conditions of the CLASSICAL ASSUMPTIONS than to maximize the value of R2 and adjusted R2.

e. Pure serial correlation is serial correlation of the error terms that is caused by a specification error such as: an omitted variable and/or an incorrect functional form.

Explanation / Answer

Part-a-True

Part-b -False

Part-c-True

Part-d-True

Part-e-False

These are by definitions and so do not require explanation

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