Question: Take themodel Y X0e with E[Xe] 0. Define the ridge regression estimator b Xn i1 Xi X0 i I k !1

Take themodel Y Æ X0¯Åe with E[Xe] Æ 0. Define the ridge regression estimator b¯ Æ

Ã

Xn iÆ1 Xi X0 i

ŸI k

!¡1 Ã

Xn iÆ1 XiYi

!

(7.43)

here ¸ È 0 is a fixed constant. Find the probability limit of b¯ as n!1. Is b¯ consistent for ¯?

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