{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Exercise 3

# Exercise 3 - University of California D Steigerwald...

This preview shows pages 1–2. Sign up to view the full content.

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.

Unformatted text preview: University of California D. Steigerwald Department of Economics Economics 140A Exercise 3 1. Consider the model Y t = X t + U t , t = 1,2,...,n , where X t is the period- t value of an exogenous variable with mean zero, is an unknown parameter, the period- t error U t ~ IN(0, 2 ) with known variance, and . n n X Y Let B be the ordinary least square estimator of . a) Derive the mean, variance, and distribution of B . Determine the smallest interval such that there is a 95 percent probability that B lies in the interval. b) Construct a 95 percent confidence interval for . Why do we use the word confidence? Give an intuitive description of the relation between probability and confidence. c) Consider the following axioms of probability: (i) P(A) for any event A in the sample space, S ; ( i i ) P(S) = 1 . If we interpret S as the parameter space, does the concept of confidence satisfy probability axioms (i) and (ii)? (For example, if is the parameter space, does...
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

Exercise 3 - University of California D Steigerwald...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online