Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose the classical linear regression model applies to y=a+Bx+yw+0z+ Where x, w, z are independent variables, & is the error term, and a,,y, and
Suppose the classical linear regression model applies to y=a+Bx+yw+0z+ Where x, w, z are independent variables, & is the error term, and a,,y, and 0 are parameters to be estimated with OLS. a. What regression is necessary to incorporate true information that -20? Be as specific as you can. b. If the restriction is true, will the restricted regression you propose in (a) have a larger or smaller R2? Explain. c. Use your intuition to answer this question: will the variance of 0 be bigger or smaller with the new regression? Explain. d. Will the estimate of be biased in the restricted regression if the information is false? e. Explain exactly what you would do to test your regression in (a) against the unrestricted regression. Show the null and alternative hypothesis, what type of test you would perform, and the degrees of freedom for the numerator and denominator. Hint: For b, c, and d: you need to write just a few sentences, thinking about "truth" (unbiasedness) and "precision" (smallest variance). You do not need to add any equations to the answers to b,c, and d.
Step by Step Solution
★★★★★
3.59 Rating (163 Votes )
There are 3 Steps involved in it
Step: 1
a reg that c ression is me H B ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started