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Suppose you are interested in studying the relationship between education and wage, More specifically, suppose that you believe the relationship to be captured by the
Suppose you are interested in studying the relationship between education and wage, More specifically, suppose that you believe the relationship to be captured by the following linear regression model, Wage = Do + 8, Education + u Suppose further that the only unobservable that can possibly affect both wage and education is intelligence of the individual. OLS assumption (1): The conditional distribution of u, given X, has a mean of zero. Mathematically. E (u,[X,) =0.Which of the following provides evidence in favor of OLS assumption #1? (Check all that apply) A. E(Intelligence\\ Education = x) = E(Intelligence\\ Education = y) for all x # y. B. corr( Intelligence, Education) # 0. C. covariance(Intelligence, Education) #0. D. corr( Intelligence, Education) = 0.Which of the following provides evidence against of OLS assumption #1? (Check all that apply) A. covariance(Intelligence, Education) # 0. B. com(Intelligence, Education) = 0. C. E(Intelligence\\ Education = x) = E(Intelligence\\ Education = y) for all x # y. D. corr( Intelligence, Education) #0. OLS assumption (2): (X;, Y/) , /=1,..., n are independently and identically distributed.Suppose you would like to draw a sample to study the effect of education on wage, Which of the following provides evidence in favor of OLS assumption #2? (Check all that apply) A. corr( Intelligence, Education) = 0. B. A random sample is drawn from a population of college graduates. )C. A sample consisting of a group of college students is drawn repeatedly each year over the course of their college careers, D. A sample consisting of all honor students is drawn from a population of college graduates.Suppose you would like to draw a sample to study the effect of education on wage, Which of the following provides evidence against OLS assumption #27 (Check all that apply) A. Observations consisting of the same group of college students are drawn repeatedly each year over the course of their college careers B. A random sample is drawn from a population of college graduates. C. corr(Intelligence, Education) =0. D. A sample consisting of all honor students is drawn from a population of college graduates.OLS assumption (3): Large outliers are unlikely. Mathematically, X and Y have nonzero finite fourth moments: 0
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