Exercise

# Crisis structural break: II

The video identified a structural break for a *simple relationship* between population size and time in China. In this and the following exercise you'll use the richer **factor model relationship** between portfolio returns and mortgage delinquencies from Chapter 1 to test for a structural break around 2008, by computing the Chow test statistic for the factor model.

First, after importing the `statsmodels`

API, you'll run an OLS regression for 2005 - 2010, with quarterly minimum returns `port_q_min`

as the *dependent* variable, and mortgage delinquencies `mort_del`

as the *independent* variable (plus an intercept term).

Take note of the sum of squared residuals `ssr_total`

from the regression `result`

(this will be provided in the next exercise to help derive the Chow test statistic).

Instructions

**100 XP**

- Import the
`statsmodels`

API. - Add an intercept term to the regression.
- Use OLS to fit
`port_q_min`

to`mort_del`

. - Extract and display the sum-of-squared residuals.