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Introduction to Econometrics 3rd Edition by James Stock, James Stock
Edition 3ISBN: 978-9352863501Introduction to Econometrics 3rd Edition by James Stock, James Stock
Edition 3ISBN: 978-9352863501 Exercise 18
( Y i X₁i X₂i ) satisfy the assumptions in Key Concept 6.4; in addition, var(u i | X₁i X₂i )= 4 and var( X₁i ) = 6. A random sample of size n = 400 is drawn from the population.
a. Assume that X₁ and X₂ are uncorrelated. Compute the variance of
1.
b. Assume that cor (Y₁ , X₂ )= 0.5. Compute the variance of ß 1.
c. Comment on the following statements: "When X₁ and X₂ are correlated, the variance of
1 is larger than it would be if X₁ and X₂ were uncorrelated. Thus, if you are interested in, it is best to leave out of the regression if it is correlated with X₁."
a. Assume that X₁ and X₂ are uncorrelated. Compute the variance of
1.b. Assume that cor (Y₁ , X₂ )= 0.5. Compute the variance of ß 1.
c. Comment on the following statements: "When X₁ and X₂ are correlated, the variance of
1 is larger than it would be if X₁ and X₂ were uncorrelated. Thus, if you are interested in, it is best to leave out of the regression if it is correlated with X₁."Explanation
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The general formula for multiple regress...
Introduction to Econometrics 3rd Edition by James Stock, James Stock
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