326_midterm-10-solution

326_midterm-10-solution - UBC, ECON 326 - 033 Solution to...

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Unformatted text preview: UBC, ECON 326 - 033 Solution to 2010 Midterm Examination Question 1 (a) True. ˆ U i ’s are the fitted residuals from a regression with an intercept, and ∑ i ˆ U i = is the normal equation obtained from the OLS first-order conditions for the intercept. (b) False (in general). ˜ U i ’s are the fitted residuals from a regression without an inter- cept, and therefore the OLS first-order condition corresponding to the intercept does not have to hold. (c) False (in general). EU i = 0 , however, a sample average of (finitely many) U i ’s does not have to be zero. (d) True. By the law of iterated expectation (LIE), E U i X 4 i = E E U i X 4 i | X i = E X 4 i E ( U i | X i ) = E X 4 i · = 0 . (e) False. Since ˜ β 1 is a biased estimator, the Gauss-Markov Theorem does not apply in this case. In fact, one can show that ˜ β 1 has a smaller conditional variance given X 1 ,...,X n . Question 2 (a) Since n = 29 and the regression has an intercept, the number of df is 27....
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This note was uploaded on 03/24/2012 for the course ECON 326 taught by Professor Whisler during the Spring '10 term at UBC.

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326_midterm-10-solution - UBC, ECON 326 - 033 Solution to...

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