Consider the following two formulations of the bivariate PRF, where ui and εi are both mean-0 stochastic disturbances (i.e random errors): yi = β0 + β1xi + u yi = α0
Consider the following two formulations of the bivariate PRF, where ui and εi are both mean-0 stochastic disturbances (i.e random errors): yi = β0 + β1xi + u yi = α0
A First Course in Probability (10th Edition)
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ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
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Consider the following two formulations of the bivariate PRF, where ui and εi are both mean-0 stochastic disturbances (i.e random errors):
yi = β0 + β1xi + u
yi = α0 + α1(xi − x¯) + ϵ
a) Write the OLS estimators of β1 and α1. Are the two estimators the same?
b) What is the advantage, if any, of the second model over the first?
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