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N14B27-E1

The University of Nottingham


BUSINESS SCHOOL

A LEVEL 4 MODULE, SPRING SEMESTER 2013-2014

N14B27 RESEARCH METHODS

Time allowed ONE Hour THIRTY Minutes

__________________________________________________________________________

Candidates may complete the front cover of their answer book and sign their desk card but
must NOT write anything else until the start of the examination period is announced

Answer ONE question from Section A and ONE question from Section B

ONLY silent, self-contained calculators with a Single-Line Display or Dual-Line Display are
permitted in this examination.

Dictionaries are not allowed with one exception. Those whose first language is not English
may use a standard translation dictionary to translate between that language and English
provided that neither language is the subject of this examination. Subject specific translation
dictionaries are not permitted.

No electronic devices capable of storing and retrieving text, including electronic dictionaries,
may be used.

DO NOT turn examination paper over until instructed to do so

ADDITIONAL MATERIAL: Statistical Tables – Normal Distribution Table and T-Distribution


Table (both supplied)

INFORMATION FOR INVIGILATORS: The exam papers are to be collected at the end of
the exam.

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SECTION A
Answer One Question from Section A

1.)
a) State and discuss a research question relevant to business practices which is
suitable for quantitative analysis. (20 Marks)

b) State the type of data you would collect and describe how you would undertake the
data collection. Comment on the problems you anticipate in data collection and the
strategies you would employ to overcome these problems. (20 Marks)

c) What quantitative methods would you use in your analysis? Comment on how your
chosen methods would help to answer your research question. (20 Marks)

d) What conditions do your data have to satisfy for your results to be valid? How might
the failure to satisfy these conditions affect your conclusion? (20 Marks)

e) Discuss the limitations of your proposed methods. (20 Marks)

2.) A consultancy company reports that the average profits per worker (profitability) for firms
in the construction industry are over £16,000. A sample of 250 firms shows that the
average level of profitability was £15,400, with a standard deviation of £2,200.

a) What is the probability that the profitability of a randomly sampled firm is less than
£16,000 (you can assume a normal distribution)? (20 Marks)

b) Calculate the 90% confidence interval of the average profitability for all firms. Does it
suggest that the claim ‘the average is £16,000’ is correct? (20 Marks)

c) Conduct a statistical test of the hypothesis that average profitability is equal to


£16,000 using a 5% significance level. (20 Marks)

d) Would the conclusion be different if you use a 10% significance level? (10 Marks)

e) Explain what Type I and Type II Errors are, and discuss their relevance in deciding on
the level of significance in hypothesis testing. (20 Marks)

f) Why might the normality assumption of the distribution of profits not be correct?
Which measure, other than the arithmetic mean, could be a good indicator of the
typical profitability of a firm? (10 Marks)

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SECTION B
Answer One question from Section B

3.) An economist wants to analyse the productivity of manufacturing firms. For this purpose,
he runs a regression that includes the following variables:

 ln_productivity, defined as the logarithm of value added per worker in millions of GBP

 ln_K, defined as the logarithm of capital in millions of GBP

 ln_L, defined as the logarithm of the number of employees

 RD, defined as the value of research and development (R&D) expenditures in millions
of pounds

 D_import, a dummy variable which equals 1 if the company imports production inputs
and 0 otherwise.

The following regression output is obtained from STATA:

Source SS df MS Number of obs = 500


F( 4, 495) = 87.57
Model 370.7885 4 92.6971249 Prob > F = 0.0000
Residual 523.979589 495 1.05854462 R-squared = 0.4144
Adj R-squared = 0.4097
Total 894.768088 499 1.79312242 Root MSE = 1.0289

ln_product~y Coef. Std. Err. t P>|t| [95% Conf. Interval]

ln_L .7985544 .0458027 17.43 0.000 .7085627 .8885462


ln_K .1960377 .0449254 4.36 0.000 .1077696 .2843058
RD .0477946 .0471688 1.01 0.311 -.0448812 .1404704
D_import .2028703 .0922283 2.20 0.028 .0216632 .3840775
_cons .390254 .0660969 5.90 0.000 .260389 .520119

a) Interpret the coefficients, describing the magnitude of their impact on the


dependent variable (accounting for units of measurement) and their significance
level. (40 Marks)

b) Evaluate the overall fit of the model. What could be done to improve the model’s
fit? (20 Marks)

Turn over

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c) Suppose you want to test the hypothesis that the elasticity of productivity with
respect to capital is higher for importers. Explain carefully how this hypothesis can
be tested using regression analysis. (25 Marks)

d) How would you test for a non-linear relationship between R&D and productivity?
How can you find the level of R&D that maximizes expected productivity?
(15 marks)

4.)
a) Which are the main underlying assumptions of a factor analysis? Discuss the main
limitations of factor analysis? (20 marks)

b) Discuss the main assumptions underlying ordinary least squares (OLS) regression.
(40 Marks)

c) What are the consequences of multicollinearity in linear regression? How can


multicollinearity be addressed? (20 Marks)

d) Describe a method for testing for misspecification in linear regression.


(20 marks)

End

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