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Multiple regression analysis, econometrics, and statistics

  1. Oct 5, 2011 #1
    I am sooo lost in this class, please help.

    1. Let the true (population) model be y = B0+B1x1+B2x2+u where u is an unobserved error term with u (conditional) x1, x2 and N(0, sigma^2). Hence, u is normally distributed with mean 0 and variance sigma^2 (i.e., E[u (conditional) x1, x2] = 0 and V ar(u (conditional) x1, x2) = sigma^2) conditional on the observed sample. Also, assume that Cov(x1, x2) = sigma(x1x2) does not equal 0.
    a) Find y hat = E[y (conditional) x1, x2]
    b) Find Var(y (conditional) x1, x2)
    c) Assume that the econometrician (falsely) believes that y = B0 + B1x1 + v is the true model and
    uses OLS in order to estimate this model. What are the consequences of this in terms of bias and variance
    (homoskedasticity) of parameter estimates. Are the standard errors from this regression valid? If not why?
    d) Assume that the econometrician (falsely) believes that y = B0 + B1x1 + B2x2 + B3x3 + v is the true
    model and uses OLS in order to estimate this model. What are the consequences of this in terms of bias and
    variance (homoskedasticity) of parameter estimates. Are the standard errors from this regression valid? If
    not why?


    Please help.
     
  2. jcsd
  3. Oct 6, 2011 #2
    can anyone help? or does anyone have the link to a similar problem?
     
  4. Oct 6, 2011 #3
    can someone help me out? i dont need the answer straight up, just need help even getting this started

    is this right for a)?

    yhat = E[y (conditional) x1, x2] = E[ B0+B1x1+B2x2+u (conditional) x1, x2] = B0+B1x1+B2x2
     
    Last edited: Oct 6, 2011
  5. Oct 7, 2011 #4
    can someone help me with C and D? im not rly sure what to do
     
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