key35mxmf03

# key35mxmf03 - ECONOMICS 351 ANSWERS to Mid-Term Exam Fall...

This preview shows pages 1–4. Sign up to view the full content.

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

View Full Document
ECONOMICS 351 ANSWERS to Mid-Term Exam -- Fall 2003 Page 2 of 16 pages (15 marks) 1. State the Ordinary Least Squares (OLS) estimation criterion. State the OLS normal equations. Derive the OLS normal equations from the OLS estimation criterion. ANSWER : (3 marks) State the Ordinary Least Squares (OLS) estimation criterion. (3 marks) The OLS coefficient estimators are those formulas or expressions for β and that 1 ˆ 2 ˆ β minimize the sum of squared residuals RSS for any given sample of size N. The OLS estimation criterion is therefore: () ( ) = = β β = = β β N 1 i 2 i 2 1 i N 1 i 2 i 2 1 X ˆ ˆ Y u ˆ ˆ , ˆ RSS Minimize { β } j ˆ (4 marks) S t a t e t h e O L S n o r m a l e q u a t i o n s . (4 marks) The first OLS normal equation can be written in any one of the following forms: (N1) i i i i 2 1 i i i i 2 1 i i 2 1 i i Y X ˆ ˆ N Y X ˆ ˆ N 0 X ˆ ˆ N Y = β + β = β β = β β The second OLS normal equation can be written in any one of the following forms: (N2) i i i 2 i i 2 i i 1 i i i 2 i i 2 i i 1 2 i i 2 i i 1 i i i Y X X ˆ X ˆ Y X X ˆ X ˆ 0 X ˆ X ˆ Y X = β + β = β β = β β ECON 351 -- Fall Term 2003: Answers to Mid-Term Exam Page 2 of 16 pages
ECONOMICS 351

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 16

key35mxmf03 - ECONOMICS 351 ANSWERS to Mid-Term Exam Fall...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online