Stock James H., Watson Mark W. Introduction to Econometrics

Solutions to Empirical Exercises (Part 1 + Part 2).Review of Probability
There are several ways to do this. Here is one way. Generate n draws of Y, Y1, Y2, … Yn. Let Xi = 1 if Yi 3.6, otherwise set Xi =
0. Notice that Xi is a Bernoulli random variables with μX = Pr(X = 1) =Pr(Y 3.6). Compute X. Because X converges in probability to μX = Pr(X = 1) = Pr(Y 3.6), X will be an accurate approximation if n is large.
Review of Statistics
Linear Regression with One Regressor
Regression with a Single Regressor: Hypothesis Tests and Confidence Intervals
Linear Regression with Multiple Regressors