Consider the econometric model price = Bo + B1raings + u. We estimate this model with OLS using a sample of Amazon products, for which we observe the price and the number of ratings. We know that: O If we assume homoskedasticity, the variance of B, equals the variance of the error term O If the number of ratings is very different across products (i.e. the variance of ratings is large), the variance of B, is smaller than it would be otherwise. O If, for a given number of ratings, the price is very different across products, the variance of B, is smaller than it would be otherwise. O The variance of B, is smaller when the variance of u is higher
Consider the econometric model price = Bo + B1raings + u. We estimate this model with OLS using a sample of Amazon products, for which we observe the price and the number of ratings. We know that: O If we assume homoskedasticity, the variance of B, equals the variance of the error term O If the number of ratings is very different across products (i.e. the variance of ratings is large), the variance of B, is smaller than it would be otherwise. O If, for a given number of ratings, the price is very different across products, the variance of B, is smaller than it would be otherwise. O The variance of B, is smaller when the variance of u is higher
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Transcribed Image Text:Consider the econometric model price = Bo + Braings + u. We estimate this model with OLS using a sample of
Amazon products, for which we observe the price and the number of ratings. We know that:
O If we assume homoskedasticity, the variance of B, equals the variance of the error term
O If the number of ratings is very different across products (i.e. the variance of ratings is large), the variance of B, is smaller than it would
be otherwise.
O If, for a given number of ratings, the price is very different across products, the variance of Bo is smaller than it would be otherwise.
O The variance of B, is smaller when the variance of u is higher
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