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Suppose data are generated such that Yi = 0 + 1Xi + ui , where E[u | X] = 0. Suppose the analyst has developed
Suppose data are generated such that Yi = 0 + 1Xi + ui , where E[u | X] = 0. Suppose the analyst has developed a method that delivers the following estimates E[Y\| X = 3] = 4 E[Y\| X = 6] = 10 Var( \X) = 5 Var( \Y ) = 2. The analyst has a simple random sample with many observations, and believes the estimates above were from consistent estimators. i. Does this problem assume SLR.1? ii. Using the assumption E[u | X] = 0, interpret 1 in the top equation of this problem. iii. Provide an estimate of 1 using these estimates. iv. Provide an estimate of E[Y | X = 4]. v. Estimate whether Cov(Y, X) > 0 (positive covariance) or Cov(Y, X) < 0 (negative covariance). (Estimate here means provide an educated guess for whether the covariance is positive or negative.) vi. Provide an estimate of the numerical value of Cov(Y, X)
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