Explain the meaning of regression, Econometrics

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Problem 1:

a. Explain the meaning of regression and its usefulness.

b. Distinguish between GARCH (1, 1) and asymmetric GARCH.

c. Clearly explain the two tests used for Cointegration?

d. Differentiate between a deterministic trend and a stochastic trend.

e. What is a Regime Switching Model?

Problem 2:

Consider the following regression result:

Y = 24.77 + 0.9415X1t - 0.0424X2t

Standard errors: (6.7525) (0.8229) (0.0807)

R-squared = 0.9635, R-bar squared = 0.9531 df =7

F-ratio = 92.40

Where Y denotes consumption, X1t denotes income and X2t denotes wealth

Required:

(a) Interpret the estimated regression results?

(b) With reference to your answer to (a), explain, with supporting reasons, the problem(s) with this regression?

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