slides_Ch2_W[1]

We do so because the mle approach requires a

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Unformatted text preview: p would entail solving the FOCs in (5) to get explicit ˆ OLS ˆ OLS . expressions for the βo , β1 Actually, we do not really need to go through the algebra because we ˆ MM = βOLS . ˆ can claim that β Are you surprised about this result? You should not! Why not? ˆ MM and βOLS solve the same system of equations which in ˆ Because, β the case of OLS are the FOCs of the minimization program and in the case of MM are the sample analogues to the two moment conditions E [u ] = 0 and E [ux ] = 0. Melissa Tartari (Yale) Econometrics 35 / 93 The Maximum Likelihood Estimator We postpone maximum likelihood estimation to when we cover Chapter 6. Melissa Tartari (Yale) Econometrics 36 / 93 The Maximum Likelihood Estimator We postpone maximum likelihood estimation to when we cover Chapter 6. We do so because the MLE approach requires a distributional assumption that neither MM nor OLS need. Melissa Tartari (Yale) Econometrics 36 / 93 The Maximum Likelihood Estimator We postpone maximum likelihood estimation to when we cover Chapter 6. We do so because the MLE approach requires a distributional assumption that neither MM nor OLS need. We preview that ˆ MM = βOLS = βML . ˆ ˆ β Melissa Tartari (Yale) Econometrics 36 / 93 The Maximum Likelihood Estimator We postpone maximum likelihood estimation to when we cover Chapter 6. We do so because the MLE approach requires a distributional assumption that neither MM nor OLS need. We preview that ˆ MM = βOLS = βML . ˆ ˆ β ˆ OLS by β, ˆ Next, we concentrate on the OLS approach: we denote β OLS by y , and u OLS by u since this simpler notation does not yi b bi bi bi create confusion and it is ... simpler. Melissa Tartari (Yale) Econometrics 36 / 93 The Mechanics of OLS We next describe a few properties of OLS. Melissa Tartari (Yale) Econometrics 37 / 93 The Mechanics of OLS We next describe a few properties of OLS. We do so by distinguishing between algebraic or numerical properties and statistical properties: Melissa Tartari (Yale) Econometrics 37 / 93 The Mechanics of OLS We next desc...
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This note was uploaded on 02/13/2014 for the course ECON 350 taught by Professor Donaldbrown during the Fall '10 term at Yale.

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