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Using the California School Data Set from Your Textbook, You  TestScr^\widehat {\text { TestScr} }

Question 42

Essay

Using the California School data set from your textbook, you run the following regression:  TestScr^\widehat {\text { TestScr} } = 698.9 - 2.28 STR
n = 420, R2 = 0.051, SER = 18.6
where TestScore is the average test score in the district and STR is the student-teacher ratio. Using heteroskedasticity robust standard errors, you find σ^β^1=0.52\hat { \sigma } _ { \hat { \beta} _ { 1 } } = 0.52 while choosing the homoskedasticity-only option, the standard error is 0.48.
a. Calculate the t-statistic for both standard errors.
b. Which of the two t-statistics should you base your inference on?

Correct Answer:

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a. The respective t-statistics are 4.39 ...

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