Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

تمرين 2

Consider the population regression of test scores against income and the square of income in Equation (8.1).
a. Write the regression in Equation (8.1) in the matrix form of Equation (18.5). Define Y,X,U, and ß.
b. Explain how to test the null hypothesis that the relationship between test scores and income is linear against the alternative that it is quadratic. Write the null hypothesis in the form of Equation (18.20). What are R, r, and q