Problem 2. (SW 11.8(a-c)) Consider the linear probability model Y₁ = Bo+B₁X₁+u₁, and assume that E(u₂|X;) = 0. (a) Show that Pr(Y₁ = 1|X;) = Bo + B₁X₁. (b) Show that var(u₁|X₁) = (B₁ + B₁X₁)[1 − (B₁ + B₁X₁)]. [Hint: You will need the formula for the variance of a Bernoulli variable, see, e.g., SW Equation (2.7).] (c) Is u heteroskedastic? Explain.
Problem 2. (SW 11.8(a-c)) Consider the linear probability model Y₁ = Bo+B₁X₁+u₁, and assume that E(u₂|X;) = 0. (a) Show that Pr(Y₁ = 1|X;) = Bo + B₁X₁. (b) Show that var(u₁|X₁) = (B₁ + B₁X₁)[1 − (B₁ + B₁X₁)]. [Hint: You will need the formula for the variance of a Bernoulli variable, see, e.g., SW Equation (2.7).] (c) Is u heteroskedastic? Explain.
Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter10: Sequences, Series, And Probability
Section10.8: Probability
Problem 32E
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