SCHOOL OF ECONOMICS, FINANCE AND MARKETING
FINANCIAL ECONOMETRICS
TUTORIAL EXERCISES

We will not use Turnitin in this course; rather tutorials are to be submitted in the assignment box on level 7 in building 80 or sent via the post. Tutorials sent in the mail must be post marked on or before the submission date. Only hard copies will be accepted, also it is best to use a cover sheet. That is, tutorials cannot be submitted by email or via the Learning Hub.
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T1 - 10 marks: DUE DATE: Friday 20th March 2015
SIMPLE LINEAR REGRESSION
T1 covers the material in Modules 1 and 2. You are not expected to use material from later modules to answer these questions, but you may need to refer to material covered in Quantitative Methods in Finance and other finance courses.

QUESTION 1 – A Cross-sectional study
In this question you will be investigating the relationship between exports and imports using a cross-country study. The data needed is on the sheet called countries in the file Tutorial data s1 2015.xls. Economic data on the world’s countries and territories, including exports and imports is sourced from the CIA World Factbook and can be found at: https://www.cia.gov/library/publications/the-world-factbook/ (a) Check and clean the data on exports and imports so it can loaded into Eviews (you will need to do this for all data used in this Tutorial).

Checking and setting the data in horizontal line, then copying file to Eviews.

(b) Do scatter plots of the raw and logged data values. Based on these plots decide what values to use for the rest of this question.
The linear graph shows most of the data bunched around zero with a few large outliers. The logged data looks much more like a straight line, though there may be a problem with variance. Despite the variance problem,