03 Jun Question Econometrics question. You will need STATA to answer this question.
Question
Econometrics question. You will need STATA to answer this question.
A data set on basketball players (attached) is provided. In this data set we need to investigate how the salaries of the major league basketball players are determined. The variable definitions in the data set are as follows. The last six variables
are dummy variables signifying positions of the player in the field.
salary: 1993 season salary
years: years in major leagues
gamesyr: games per year in league
bavg: career batting average
hrunsyr: home runs per year
rbisyr: career runs batted in per year
runsyr: runs scored per year
fldperc: career fielding percentage
allstar: percentage of years an all?star
frstbase: =1 if first base
scndbase: =1 if second base
thrdbase: =1 if third base
shrtstop: =1 if shortstop
outfield: =1 if outfield
catcher: =1 if catcher
a. Run an OLS using the following population model and report the estimated equation
with standard errors in parenthesis and R2.
Population model: http://i.imgur.com/tHfVQax.png
b. State clearly, which position you had to use in (a) as the reference category.
c. Interpret the coefficients associated with bavg and shrtstop.
d. Test using the p?value approach, the null hypothesis that catchers and outfielders earn, on average, the same amount, all else equal. Show all your work.
e. Test at 5 percent level, that there is no difference in average salary across positions. (Hint: this is a subset test).
f. Find the correlation matrix of the explanatory variables and comment on the possible multicollinearity problem in the data. Use VIF command in STATA to check if multicollinearity is an issue.
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