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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
c9 In this exercise, you are to compare OLS and LAD estimates of the effects of 401(k) plan eligibility on net financial assets. The model is
nettfa 5 b0 1 b1inc 1 b2inc2 1 b3age 1 b4age2 1 b5male 1 b6e401k 1 u.
(i)Â Â Â Â Â Â Use the data in 401KSUBS.RAW to estimate the equation by OLS and report the results in the usual form. Interpret the coefficient on e401k.
(ii)Â Â Â Â Â Use the OLS residuals to test for heteroskedasticity using the Breusch-Pagan test. Is u independent of the explanatory variables?
(iii)Â Â Â Estimate the equation by LAD and report the results in the same form as for OLS. Interpret the LAD estimate of b6.
(iv)Â Â Â Reconcile your findings from parts (i) and (iii).
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