Your professor wants to measure the class's knowledge of econometrics twice during the semester,once in a midterm and once in a final.Assume that your performance,and that of your peers,on the day of your midterm exam only measure knowledge imperfectly and with an error, where is your exam grade,X is underlying econometrics knowledge,and w is a random error with mean zero and variance .w may depend on whether you have a headache that day,whether or not the questions you had prepared for appeared on the exam,your mood,etc.A similar situation holds for the final,which is exam two: .What would happen if you ran a regression of grades received by students in the final on midterm grades?

Question

Your professor wants to measure the class's knowledge of econometrics twice during the semester,once in a midterm and once in a final.Assume that your performance,and that of your peers,on the day of your midterm exam only measure knowledge imperfectly and with an error,  where  is your exam grade,X is underlying econometrics knowledge,and w is a random error with mean zero and variance  .w may depend on whether you have a headache that day,whether or not the questions you had prepared for appeared on the exam,your mood,etc.A similar situation holds for the final,which is exam two:  .What would happen if you ran a regression of grades received by students in the final on midterm grades?

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The Answer of Your professor wants to measure the class's knowledge of econometrics twice during the semester,once in a midterm and once in a final.Assume that your performance,and that of your peers,on the day of your midterm exam only measure knowledge imperfectly and with an error,  where  is your exam grade,X is underlying econometrics knowledge,and w is a random error with mean zero and variance  .w may depend on whether you have a headache that day,whether or not the questions you had prepared for appeared on the exam,your mood,etc.A similar situation holds for the final,which is exam two:  .What would happen if you ran a regression of grades received by students in the final on midterm grades?

Your Professor Wants to Measure the Class's Knowledge of Econometrics