work - QNo1: Agree/Disagree with reason: d) The OLS...

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QNo1: Agree/Disagree with reason: d) The OLS estimators are unbiased Answer: Agree Reason: According to the Guass-Markov Theorem, the OLS estimators are best linear unbiased estimators (BLUE). The theorem does assume independence of errors, and it does assume finite variance. Complete Description for Understanding: Assumption by taking theorem 1. Assume the population model is linear in parameters as y = b 0 + b 1 x + u 2. Assume we can use a random sample of size n , {( x i , y i ): i =1, 2, …, n }, from the population model. Thus we can write the sample model y i = b 0 + b 1 x i + u i 3. Assume E( u|x ) = 0 and thus E( u i |x i ) = 0 4. Assume there is variation in the x i In order to think about unbiasedness, we need to rewrite our estimator in terms of the population parameter Start with a simple rewrite of the formula as The OLS estimates of b 1 and b 0 are unbiased. Proof of unbiasedness depends on our 4 assumptions – if any assumption fails, then OLS is not necessarily unbiased. Remember
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This note was uploaded on 11/18/2011 for the course ECON 570 taught by Professor Staff during the Fall '08 term at UNC.

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work - QNo1: Agree/Disagree with reason: d) The OLS...

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