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Unformatted text preview: X ∗ t other than X t − V t . In e f ect, we need to & nd the part of V t that is uncorrelated with X t . To do so, we construct W t = aV t − bX ∗ t , for values of a and b to be determined. The values of a and b must be such that E ( X t W t ) = 0 and also satisfy X ∗ t = cX t − W t . Find the values of ( a,b, c ) and use the resultant W t to derive the exact & nite sample bias of the OLS estimator....
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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.
 Fall '08
 Staff
 Economics

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