True Model: Y = XB + U Observe: Y* = Y + E so Y = Y* - E 1. Show under what condition our estimated Bols is unbiased. True Model: Y = XB + U Observe: X* = X + E or X = X* - E 2. Show that our estimated Bols is biased. True Model: Y = XB + U X = YA + E 3. Show that X is a function thus correlated with U and Y is a function and thus correlated with E. Which of course means OLS estimates of B & A are biased.

True Model: Y = XB + U Observe: Y* = Y + E so Y = Y* - E 1. Show under what condition our estimated Bols is unbiased. True Model: Y = XB + U Observe: X* = X + E or X = X* - E 2. Show that our estimated Bols is biased. True Model: Y = XB + U X = YA + E 3. Show that X is a function thus correlated with U and Y is a function and thus correlated with E. Which of course means OLS estimates of B & A are biased.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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