plot the residuals against log Does the plot suggests a nonlinear relationship between the two variables

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ANSWER ALL QUESTIONS

Question 2 Check the correlations between all pairs of X variables and give some comments. If the there is reason to expect that the regressors are perfectly multicollinear, what does multicollinearity do to your regression? Will the overall fit be affected? Test again the coefficients by using heteroskedasticity-robust standard errors. Test also the homogeneity restriction H0 : β3 + β4 + β5 = 1. In particular, write the hypothesis in the form Rβ = r and calculate the F-statistics, find the critical value and discuss your conclusions.

Question 3 Extrapolate and plot the residuals against the fitted values. Also, depict a QQ-plot. What can we learn from these two graphs? Are the OLS assumptions satisfied? In particular, verify the following assumptions: Strict exogeneity, spherical error variance, and the fourth moments conditions.

Question 4 Plot the residuals against log(Q). Does the plot suggests a nonlinear relationship between the two variables? Discuss the plot. One of the LS assumption is clearly violated, which one? How can you capture this nonlinear relationship in a multiple regression model? 

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