Pset1S07v2

Pset1S07v2 - Econ 166 Joseph G Altonji Spring 2007 Problem...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 166 Joseph G. Altonji Spring 2007 Problem Set 1 Due Tuesday, January 30th, in class. Collaboration: You are free to discuss the problem set with one other student. However, you have to do your own computing in STATA and write up your own answers. Do not hand in reams of undigested computer logs. Notation: I sometimes use lower case b rather than ˆ β to denote OLS coefficient estimates or estimators. I sometimes use lower case e to denote residuals. 1. The distinction between the stochastic error term (u i ) and the residual (e i ) is a very important one. a. Define both in words. b. Usually we can’t observe the error term, but we can get around this difficulty if we assume values for the true coefficients. Suppose that the true β 0 = -2 and the true β 1 equals 1.5, so that the population regression function is E(y i |x i ) = -2 + 1.5x i Suppose also that the sample estimate of β 0 is 0.0 and the sample estimate of β 1 is 1. b.1) Write down the sample regression function. b.2 Fill in the following table, which is for the first four observations. y i x i E(y i |x i ) Y_hat i β 0 -b 0 + ( β 1 -b 1 )x u i e i 1 2 3 3 2.5 1 6 4
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 b.3 Verify for the first two data points that the residual e i is the sum of the true error u i and the estimation error
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/03/2008 for the course ECON 166 taught by Professor Josephaltonji during the Spring '07 term at Yale.

Page1 / 3

Pset1S07v2 - Econ 166 Joseph G Altonji Spring 2007 Problem...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online