SOA Exam SRM Sample Question 19
Study guide: Exam SRM
The regression model Y = \beta_0 + \beta_1 X_1 + \beta_2 X_2 + \beta_3 X_1 X_2 + \varepsilon is being investigated.
The following maximized log-likelihoods are obtained:
- Using only the intercept term: –1126.91
- Using only the intercept term,
X_1, andX_2: –1122.41 - Using all four terms: –1121.91
The null hypothesis H_0: \beta_1 = \beta_2 = \beta_3 = 0 is being tested at the 5% significance level using the likelihood ratio test.
Determine which of the following is true.
- A) The test statistic is equal to 1 and the hypothesis cannot be rejected.
- B) The test statistic is equal to 9 and the hypothesis cannot be rejected
- C) The test statistic is equal to 10 and the hypothesis cannot be rejected.
- D) The test statistic is equal to 9 and the hypothesis should be rejected.
- E) The test statistic is equal to 10 and the hypothesis should be rejected.
Answer this question and see the worked solution