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Financial Econometrics Assignment
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Its an assignment for Financial Econometrics. It features questions on endogeneity and credit card rates.
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ECON 4140- Group Assignment 1Total Mark: 10 marks
Submission file(s): - Team_Contract.docx
- WS01.docx
Please work in groups to complete this lab. This workshop is worth 10% of the total course
grade. Please submit the submission file(s) in the printed paper version at the starting of July 4th
Class time. Only one person must submit for the group.
Part I: The Team Contract
1- In this course, you will be doing lots of group work. To make sure this will be a good
experience for all, let’s work on preparing a team contract. This contract must contain
“Team Procedures,” “Team Expectations,” and “Consequences.” See the following links for
samples and ideas (examples only- your contract does not have to be the same):
- Guidelines for writing team contracts- University of Arizona:
http://math.arizona.edu/~kerimar/Team%20Contract.doc
- Team Contract- MIT:
- http://web.mit.edu/6.005/www/fa15/projects/abcplayer/team-
contract/#team_contract
Submit a signed copy of the contract as Team_Contract.docx.(add your names at the end of
the document) as long as there is actual agreement.
ECON4140 - Workshop 1 Page 1 of 5
, Part II: Endogeneity
An August 2018 NBER Working Paper, “Hazed and Confused: The Effect of Air Pollution on
Dementia” (https://www.nber.org/papers/w24970.pdf), examines how cumulative long‐term
exposure to air pollution – concentration of particulate matter (PM2.5) – affects the chance of
being diagnosed with Alzheimer’s disease and related dementias later in life. Alzheimer’s leads
to continued deterioration of memory and thinking skills. While the biggest risk factor is age,
other risk factors include things people can work to change or manage, such as “diabetes, high
blood pressure, obesity, smoking, depression, cognitive inactivity or low education, and physical
inactivity.” On page 2 of the NBER Working Paper, the authors state: “Like the prior
observational studies, we observe strong, positive relationships between the prevalence of
dementia and the average concentration of PM2.5 over a decade.” Among 75-year-olds, the
correlation coefficient between dementia rates and PM2.5 exposure is 0.66. In other words,
people who have spent time living in places with high levels of air pollution are more likely to
suffer from dementia later in life.
Questions:
(a) What is the authors’ research question?
(b) For answering the authors’ research question, how would we imagine the gathering of exper
imental data, even if it is not realistic in this case?
(c) What does it mean to say that pollution exposure is endogenous? Explain. How does this aff
ect the assessment of the reported coefficient of correlation (0.66)? Answer within
4 sentences.
ECON4140 - Workshop 1 Page 2 of 5
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