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yi = o + ui
Also suppose that Var ui = 10
(a) derive the OLS estimator for o
(b) derive the variance of the estimator
(c) Suppose that we have the following
13 13
9 13
8 13
8 12
9 10
8 10
9 11 10
(d) calculate o
y i = o +
k
X
j Xij + ui
j=1
u
= yi o
k
X
j Xij
j=1
i. Show that u
=
1
N
N
X
u
i = 0
ii. Show that estimated covariance between the estimated residuals and any of the independent variables is 0. i.e. show tat
1
N
X
Xij Xj u
i u
= 0
1
PAGE
(c) Derive the variance of the OLS estimator assuming that Var ui |X =
yi = o + 1 x1 + 2 x2 + 3 x3 + u
You are interested in estimating the sum of the parameters on x1 and x2 ; call this 1 = 1 + 2
(a) Show that 1 = 1 + 2 is an unbiassed estimator of 1
yi = o + 1 xi + ui
(a) Suppose you run a regression
xi = o + i
and the you run
yi =
i + i
Prove that
= 1
Question-7 C1, page 110
Question-8 C2, page 110
Question-9 C3, page 111
Question-10 C8, page 112
End of Assignment # 1
Total pages: 2
Page 2 of 2