Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 18

If we start with (6.38) under the CLM assumptions, assume large n, and ignore the esti-

(i) For what values of _ ˆ will the point prediction be in the 95% prediction interval? Does this condition seem likely to hold in most applications?

(ii) Verify that the condition from part (i) is satisfied in the CEO salary example.