The Excel data set FOREST.XLS contains data on Y=deforestation, X=population density, W=change in cropland and Z=change in pasture land.
a) Run a regression of Y on X and interpret the results
b) Run a regression of y on W and one of Y on Z and interpret the results.
c) Create a new variable, V, by dividing X by 100. What are the units in terms of which V is measured?
d) Run a regression of Y on V. Compare your results to those for (a). How do you interpret your coefficients? How does alpha estimated differ between (a) and (d)?
e) Experiment with scaling dependent and explanatory variables (i.e. by dividing them by a constant, multiplying by a constant, adding a constant or any other changes that you consider) and see what effect this kind of data manipulation has on your coefficient estimates.
f) Include an extra variable that generates multicollinearity issues.
g) Based on the presented data, propose a research question and run appropriate test/s to provide an econometric solution to the identified problem. Your final discussion should be supported with appropriate suggestions and comments on how to improve the proposed econometric model.
Select a leading Stock Market index and develop a research context where you outline a research question and relevant research hypotheses that you wish to address with the support of Ordinary Least Square econometric analysis.
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