Thursday, February 23, 2012, at 3:46 PM

Errata for Principles of Econometrics, 4e

First Printing
Page

Date

Correction

68

10-feb-11

Below equation (2.25), second line: the sentence should

read In the linear specification the expected price per
additional square foot is constant.

69

31-mar-11

Below equation (2.26), first line: x = SQFT 2.

Thanks to Michelle Savolainen, Louisiana State
University.

70

18-apr-11

In footnote 4: See Appendix A.3.1, Derivative Rule 7.

Thanks to Genevieve Briand, Washington State
University.

74

10-feb-11

Figure 2.18, top panel: The legend should read House

Prices ($1,000) in Golden Oaks

79

17-feb-11

116

4-mar-11

Exercise 2.10: In the original capm data files, in all

formats, the risk free rate was based on 30-day T-bill,
but it was an annual yield. It has been, effective
February 17, 2011, has been changed to the correct
monthly rate. The definition file capm.def also explains
this. Thanks to Jeffrey Parker, and his students, at Reed
College for pointing this out.
In line 1, 1 2 should be 1/2.

116

4-mar-11

In line 4, a 100(1)%...

118

4-mar-11

In line 2, or H0: 1 2 20 250 0

120

4-jan-11

Exercise 3.6, line 10. H 0 : 2 0 should be H1 : 2 0

121

17-feb-11

Exercise 3.7: In the original capm data files, in all

formats, the risk free rate was based on 30-day T-bill,
but it was an annual yield. It has been, effective
February 17, 2011, has been changed to the correct
monthly rate. The definition file capm.def also explains
this. Thanks to Jeffrey Parker, and his students, at Reed
College for pointing this out.

123

4-jan-11

Exercise 3.13, line 3. The model is said to be log-linear

because the right-hand side is linear in the parameters,
even though it has a quadratic term on the right-hand
side. We should have perhaps said more simply that it is
a logarithmic model

130

16-june-11

In line 9 of first paragraph. the difference between

the predicted value of y and the actual value of y..
would be better worded the difference between the
actual value of y and the predicted value of y.. Thanks
to Michelle Savolainen, Louisiana State University

141

4-mar-11

In line 5, above Figure 4.4: Using just these two

algebraic .

147

4-mar-11

In line 4 of 2nd paragraph: dependence in the

regression errors.

151

4-mar-11

In line 5: in addition to TIME3.

182

2-may-11

In line 6: The interval estimate is = (10.093, 5.723),

and in the upper bound calculation the point estimate
should be 7.9079. Thanks to Sandamali Kankanamge,
Louisiana State University and Diana Whistler,
University of British Columbia.

13-oct-11

184

18-feb-11

b1 , b2 ) should be
In expression for standard error cov(

cov(
b ,b )
2

189

5-may-11

Under point 4, in the second line of the equation, under

b , b ) should be cov(
b ,b ) .
the square root sign, cov(
1

Thanks to Joe Goss, Louisiana State University.

197

28-nov-11

In line 4. the approximate increase in wages from

an extra year of experience is 100 Thanks to Alex
James, Louisiana State University

203

18-feb-11

Exercise 5.8(c): Change (iv), (v), (vi) to (i), (ii), (iii)

217

18-feb-11

First equation: delete last parenthesis

225

18-feb-11

Equation (6.5): In this equation the terms of the

regression are written as xkk rather than as kxk as in
Equation (5.3). The two terms are equivalent

228

18-feb-11

In the equation: Change ADVER to ADVERT.

234

2-may-11

In equation (6.21): the sign of the intercept is positive.

That is FAMINC 26191 5.155 HEDU

239

18-feb-11

First line in next-to-last paragraph: Change (6.26) and

(6.27) to (6.29) and (6.30)

250

29-jan-11

Exercise 6.15(c), line 4. price will be more than

$20,000.

251

29-jan-11

Exercise 6.17(g), line 2: "increased the price of the

house by more than $20,000."

251

31-oct-11

Exercise 6.18 (a) and (c): Replace Report the estimated

relationship between ln(SPRICE), LIVAREA and AGE
for two- three- and four-bedroom houses with: Using
the estimates from this model, find the regression
functions for two- three- and four-bedroom houses.

251

18-feb-11

In the equation in Exercise 6.19 DEPARTS should be

DEPART.

251

18-feb-11

Below equation in Exercise 6.19: Find 95% interval

estimates Delete a

252

18-feb-11

In Exercise 6.22(c) and (e): Replace INC with INCOME

284

10-feb-11

Equation (7.20): The alternative hypothesis is H1 : 0

. The < 0 is missing in the text.

295

29-jan-11

Exercise 7.15, line 2. Using the equation estimated in

part (c), predict

297

29-jan-11

The running page head should read Appendix 7B The

Differences Estimator

297

29-jan-11

The heading for Appendix 7B should be Derivation of

the Differences Estimator

297

29-jan-11

line 5. To verify the expression for the differences

estimator

315

18-feb-11

Label second equation as (8.36)

320

13-oct-11

In Table 8.1, the last digit in three of the four LS-robust

standard errors should be increased by 1. The correct
ones are: (0.0653) for C; (0.0604) for PRATIO; (0.0344)
for DISP_PEPSI. Thanks to Diana Whistler, University
of British Columbia.

325

16-jul-11

In Exercise 8.9(a) should read as the true parameter

values,

328

13-mar-11

In each of the last 3 equations, the coefficient of

not 3 .
DISP _ PEPSI should be

346

13-oct-11

In the upper part of Table 9.2, the t-value for Gt should

be 6.120. Thanks to Diana Whistler, University of
British Columbia.

349

13-oct-11

Towards the bottom, the calculation for Z 2 should use

0.411, not 0.414, and the result should be 4.07 not 4.10.
Thus, the correct version is Z 2 98 0.411 4.07 .
Thanks to Diana Whistler, University of British
Columbia.

383

2-aug-11

Exercise 9.2(b). The first line on this page should read

Using a two-tail test and

383

19-jul-11

In Exercise 9.3, after the first sentence add the sentence:

The amounts spent on advertising in the last two
weeks were ADV104 1.313 and ADV105 1.358 .

383

19-jul-11

In Exercise 9.3(b), after the first sentence add the

sentence: The estimated error variance is 2 2.3891
.

384

2-aug-11

In Exercise 9.6, line 7, Delete: (stored in the file

homes.dat).

385

22-aug-11

In Exercise 9.8, the first line should read: In Section

9.6, not 9.1.

385

2-apr-11

In Exercise 9.9(a) 1 00 should be 1 01 .

387

9-mar-11

Exercise 9.13(e) Change by at least $6 million to by

more than $6 million.

397

10-feb-12

Above equation (9C.1), the equation reference should be

(9.43) not (9.44). Thanks to Erdogan Cevher.

398

10-feb-12

Below equation (9C.4), b1 and b1 should be b1 and b2 .

Thanks to Erdogan Cevher.

435

4-jan-11

Equation (10E.1) should have a multiplication sign in

the middle. That is, it should read
Cragg Donald F N G B L rB2 1 rB2 .
Thanks to Deokrye Baek, Louisiana State Univ.

487

16-jul-11

In the Dickey-Fuller test equation for B, change the

coefficient of Bt 1 from 0.237 to 0.290. Thanks to
Genevieve Briand, Washington State Univ.

520

4-jan-11

The Y axis of Figure 14.1(a) is labeled as starting at 12

instead of 30. Thanks to Genevieve Briand,
Washington State Univ.

521

16-Aug-11

The Y axis in Figure 14.2(d) should be from 0.00 to 0.07

and not from 0.00 to 0.09. Thanks to Randall Campbell,
Mississippi State University.

550

24-may-11

The following changes should be made in Table 15.7

under Cluster Robust Standard Errors. For C: Change
0.06153 to 0.06149, and the t-value to 23.58. For
SOUTH: Change 0.06539 to 0.06535. For UNION:
Change 0.01885 to 0.01884.

550

4-jan-11

In footnote 9, the first sentence should read The cluster

robust standard errors are computed with the degrees of
freedom correction in EViews 7.0.

560

1-apr-11

Equation (15.38). The parameters should be

Currently the symbol appears twice

561

1-apr-11

Equation (15.39). The parameters should be

Currently the symbol appears twice

569

1-apr-11

Lines 3 & 4: In two places the value 0.729 should be

replaced by 0.5314

569

1-apr-11

Line 4: The value 0.854 should be replaced by 0.729

574

13-oct-11

Exercise 15.8, first line: The data are discussed in

Section 15.1.

575

28-aug-11

Exercise 15.8(h) should read: Using the differenced data

in part (f), estimate the wage equation in part (g), but

575

13-oct-11

Exercise 15.9, first line: The data are discussed in

Section 15.1.

578

13-oct-11

Line -4: The value for 2 should be 6328.437.

620

7-oct-11

653

19-jan-11

In the middle of the page. The scale factor and marginal

effect were calculated at AGE = 42.5 rather than the
correct AGE = 42.54. The revised text should read, The
0.3630 . Thus the marginal
calculated scale factor is
effect on observed hours of work of another year of
education is
E HOURS
2 73.29 0.3630 26.61
EDUC
Thanks to Diana Whistler, University of British
Columbia.
Exercise A.1(b): "x =10 and at x = 50" should be "P =
10 and at P = 50"

654

2-feb-12

709

5-may11

Inside rear
cover: left side

31-mar-11

Exercise A.4(c) should read Using the results in parts

(a) and (b), express the . Thanks to Micah West and
Deborah Williams, Louisiana State University.
In line 2, nought should be naught, though they have
equivalent meanings. Thanks to Julie Leiby, Louisiana
State University.
Under Prediction: the forecast error should be
f y0 y 0 . Thanks to Michelle Savolainen, Louisiana
State University

Inside rear
cover: left side

31-mar-11

Under Log-Linear Model: the generalized goodness of

fit measure can be computed either as
Rg2 corr y , y n or Rg2 corr y , y c . These
2

values are equal since the natural and corrected

predictors differ only by a scalar. Noted by Michelle
Savolainen, Louisiana State University