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BENG449 Problem 6 4

# BENG449 Problem 6 4 - BENG449 Problem Set 6 Question 4 Alex...

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BENG449 – Problem Set 6, Question 4 Alex Lemon March 11, 2008 1 Remarks The graphs of theoretical standard error versus the observed standard devia- tion in the parameter estimates generally coincide very well. As expected, the standard error of the parameter estimates increases linearly with the standard deviation of the disturbance terms. Although the theoretical standard errors generally provided a very accurate approximation of the observed standard de- viations of the parameter estimates, it appeared that the theoretical estimate had a tendency to systematically underestimate the variation in the parameter estimates as the standard deviation of the disturbance terms grew. This is most likely a function of the fact that non-linear OLS estimates are biased (they are still consistent, though). Thus, given the comparatively small number of times that the experiment was replicated (only 1000 times), the consistency of the pa- rameter estimates did not necessarily manifest itself for large values of standard deviations in the disturbance terms.

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