e1-245a - f Y . Determine the variance of the prediction...

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University of California D. Steigerwald Department of Economics Economics 245A Exercise 1 Consider the scalar regression model , t t t U X Y + = β where n t , , 1 K = . For n t , , 1 K = the stochastic error t U satisfies . 0 2 2 2 t t t X EU EU σ = = Further, for s t () . 0 = t s U U E Assume that {} n t t X 1 = can be treated as a fixed realization whose empirical moments match those of a zero mean Gaussian variable. a) Determine the relative efficiency of the ordinary least squares and the generalized least squares estimators of . Assume that the value of the regressor at the future point f>n is known. b) Consider predicting the dependent variable
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Unformatted text preview: f Y . Determine the variance of the prediction error associated with each estimator. c) Consider predicting the conditional mean of the dependent variable ( ) f f X Y E | . Determine the variance of the prediction error associated with each estimator. d) Suppose that . 4 2 2 t t X EU = As the point f moves further into the future, how does this influence your choice of estimator? Does it matter whether the prediction is of f Y or of ( ) f f X Y E | ?...
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This note was uploaded on 12/26/2011 for the course ECON 245a taught by Professor Staff during the Fall '08 term at UCSB.

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