Question
Your friend A is considering the model below Yi = 0 + 1Xi1 + 2Xi2 + Ui and your friend B is considering the model
Your friend A is considering the model below Yi = 0 + 1Xi1 + 2Xi2 + Ui and your friend B is considering the model below Yi = 0 + 1Xi1 + Ui Both of your friends are sharing the same data and fit their models with the OLS estimator. Both of your friends obtained an estimate for 1: the estimate obtained by friend A is A 1 and that obtained by friend B is B 1 . Your two friends asked you whether you can tell if A 1 > B 1 or A 1 < B 1 based on what you have learned in QTM 220. The only information that your friend A provided is the following: when A checked the data, cor(Xi1, Xi2) > 0 and the estimate 2 = 100. (a) I can only tell if my friend B provides me information on B 1 . (b) Whatever information I have I cannot tell. The only way I can tell would be running the two models myself. (c) A 1 > B 1 (d) A 1 <
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