What is the covariance matrix, Cov [, b], of the GLS estimator = (X'1X)1
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What is the covariance matrix, Cov [β, β − b], of the GLS estimator β = (X'Ω−1X)−1 X'Ω−1 y and the difference between it and the OLS estimator, b =(X' X)−1 X'y? The result plays a pivotal role in the development of specification tests in Hausman (1978).
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Write the two estimators as x eandb X Then b has E ...View the full answer
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