Question 1 (86 marks)

(a) 14 marks

i) Assume that

E(lbwght|cigs) Bo + Bicigs.

=

The associated linear regression equation in error form is given by

Ibwght = Bo + Bicigs + u.

(1)

Estimate (1) by OLS. Report the estimated equation in equation form in the main body of

your assignment. Report the estimated coefficients and standard errors to three decimal

places. Place the Eviews output in Appendix (a).

ii) Test the individual significance of the regressor cigs. State the null and alternative

hypotheses, the form and sampling distribution of the test statistic under the null, the

sample and critical values of the test statistic, your decision rule and your conclusion.

iii) What is the predicted average birth weight of infants born to mothers who do not smoke

during pregnancy?

iv) What is the predicted average birth weight of infants born to women who smoke 10

cigarettes per day during pregnancy?

v) Do your results provide conclusive evidence that smoking by the mother during pregnancy

reduces/increases the average birth weight of a newly born infant? Briefly explain.

(2 marks)

(6 marks)

(2 marks)

(2 marks)

(2 marks)