The Gauss-Markov theorem says that the OLS estimator is the best linear unbiased estimator. Explain which assumptions are needed in order to verify Gauss-Markov theorem? Consider the Cobb-Douglas production function
Explain what assumptions are needed in order for the OLS estimator to be unbiased in a crosss sectional environment.
Explain what assumptions are needed in order for the OLS estimator to be unbiased in a panel data environment.
4. Is OLS estimator unbiased when we use time series data? Why
or why not? Are standard errors still valid if there is serial
correlation? Why or why not?
Suppose that
Yi=?0+?1Xi+ui and that E[ui|Xi] = 0 and therefore OLS is an
unbiased estimator.
a) Show that Zi=Xi is a valid instrument for Xi , i.e. it is
both relevant and exogenous.
b) Show that the 2SLS estimator of ?1 using Xi as an instrument
for Xi is exactly equal to the OLS estimator of ?1
c) Let Zi=X2i and assume Xi is normally distributed N(?,?²). Is
Zi exogenous? Is Zi relevant? Explain how the answer to these
questions...
Under assumption MLR.1 - MLR.5, derive the variance of the OLS
estimator bj in the multiple regression model. Express the variance
in terms of the R-squared from the regression of xj on the other
explanatory variables.
Explain and discuss why engineers usually want the minimum
variance unbiased estimator (MVUE). What benefits are achieved
by using the MVUE in making engineering decisions, and what risks
or impacts might be seen if another estimator is chosen at times?
Try to use hypothetical examples to illustrate your thinking.