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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
8 Consider the standard simple regression model y 5 b0 1 b1x 1 u under the Gauss-Markov Assumptions SLR.1 through SLR.5. The usual OLS estimators bˆ and bˆ are unbiased for
0 1
their respective population parameters. Let b˜ 1 be the estimator of b1 obtained by assuming
the intercept is zero (see Section 2.6).
(i) Find E(b˜1) in terms of the xi, b0, and b1. Verify that b˜ 1 is unbiased for b1 when the population intercept (b0) is zero. Are there other cases where b˜ 1 is unbiased?
(ii)
|
Find the variance of b˜ 1. (Hint: The variance does not depend on b0.)
(iii)
|
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Show that Var(b˜ 1) # Var(b1). [Hint: For any sample of data,
∑i51 (x 2 x¯) , with strict inequality unless x¯ 5 0.]
n
i51
xi
n 2
i
(iv) Comment on the tradeoff between bias and variance when choosing between bˆ and b˜ .
1 1
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