Question: ( 31 points)

Download the data on Markets. These data refer to 179 Cities and come from "The Canadian People, Markets".

1. Estimate the following model, S _i = ₀ + ₁ * POP _i + ₂ * HH _i + ₃ * INC _i + _i
   Where: S = Total Retail Sales in the i-th city, in $ million.
   POP = Total Population of the i-th city, in 000’s.
   HH = Number of Households of the i-th city, in 000’s.
   INC = Total Personal Income of the i-th city, in $ million.
   and write down your results in full reporting mode. (3 points)
2. Since you are using cross-sectional data, you want to check for the existence of Heteroskedasticity. You do not have any specific correction factor in mind. So, you decide to run a White-test. Describe the procedure and report on the work and conclusions in full reporting mode. (8 points)
3. Assuming that you have rejected the null hypothesis of Homoskedasticity, you suspect that HH may be the variable that is causing Heteroskedasticity. Run a Park test to check your suspicions, write down your results and report your conclusions. (6 points)
4. Plot a scatter graph of the residuals from your equation in (a) above against the HH variable to visually verify the existence of heteroskedasticity. (3 points)
5. Assuming that you have confirmed your suspicions, proceed with the necessary transformation of your data to run a Weighted Least Squares regression, and write down your results. (4 points)
6. Explain the differences between the two models that you have estimated in (a) and (e) in terms of formulation, and signs and sizes of estimated coefficients. Which of the two models (a) or (e) do you prefer? Explain. (7 points)

Price: $2.99

Solution: The downloadable solution consists of 7 pages
Deliverable: Word Document