Consider the linear regression model for data independent over i with y i = x i
Question:
Consider the linear regression model for data independent over with . Suppose but there are available instruments with and , where . We consider the GMM estimator that minimizes
\[ Q_{N}(\boldsymbol{\beta})=\left[N^{-1} \sum_{i} \mathbf{z}_{i}\left(y_{i}-\mathbf{x}_{i}^{\prime} \beta\right)\right]^{\prime} \mathbf{W}_{N}\left[N^{-1} \sum_{i} \mathbf{z}_{i}\left(y_{i}-\mathbf{x}_{i}^{\prime} \beta\right)\right] \]
(a) Derive the limit distribution of using the general GMM result (6.11).
(b) State how to obtain a consistent estimate of the asymptotic variance of .
(c) If errors are homoskedastic what choice of would you use? Explain your answer.
(d) If errors are heteroskedastic what choice of would you use? Explain your answer.
Step by Step Answer:
Microeconometrics Methods And Applications
ISBN: 9780521848053
1st Edition
Authors: A.Colin Cameron, Pravin K. Trivedi