Source: Economic Report of the President, 2000, pp. 373 and 379.
5. Two-Variable Regression: Interval Estimation and Hypothesis Testing
CHAPTER FIVE: TWO VARIABLE REGRESSION: INTERVAL ESTIMATION AND HYPOTHESIS TESTING 159
b. Suppose you want to predict one of these indexes on the basis of the other index. Which will you use as the regressand and which as the regressor? Why?
c. Run the regression you have decided in b. Show the standard output. Test the hypothesis that there is a one-to-one relationship between the two indexes.
d. From the residuals obtained from the regression in c, can you entertain the hypothesis that the true error term is normally distributed? Show the tests you use.
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