Maurice Tutor

(5)

$15/per page/Negotiable

About Maurice Tutor

Levels Tought:
Elementary,Middle School,High School,College,University,PHD

Expertise:
Algebra,Applied Sciences See all
Algebra,Applied Sciences,Biology,Calculus,Chemistry,Economics,English,Essay writing,Geography,Geology,Health & Medical,Physics,Science Hide all
Teaching Since: May 2017
Last Sign in: 398 Weeks Ago, 3 Days Ago
Questions Answered: 66690
Tutorials Posted: 66688

Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

Experience

  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 06 Jan 2018 My Price 9.00

functional form

  1. The point of this exercise is to show that tests for functional form cannot be relied on as a general test for omitted variables. Suppose that, conditional on the explanatory variables x 1 and x 2 , a linear model relating y to x 1 and x 2 satisfies the Gauss-Markov assumptions:
  3. y 5 b 0 1 b 1 x 1 1 b 2 x 2 1 u

E( u | x 1 , x 2 ) 5 0 Var( u | x 1 , x 2 ) 5 s 2 .

To make the question interesting, assume b 2 ? 0.

Suppose further that x 2 has a simple linear relationship with x 1 :

    1. Show that

x 2 5 ? 0 1 ? 1 x 1 1 r

E( r | x 1 ) 5 0 Var( r | x 1 )5 ? 2

E( y | x 1 ) 5 ( b 0 1 b 2 ? 0 ) 1 ( b 1 1 b 2 ? 1 ) x 1 .

Under random sampling, what is the probability limit of the OLS estimator from the sim- ple regression of y on x 1 ? Is the simple regression estimator generally consistent for b 1 ?

    1. If you run the regression of y on x 1 , x 2 , what will be the probability limit of the OLS estimator of the coefficient on x 2 ? Explain.

      1

      1

    2. Using substitution, show that we can write

y 5 ( b 0 1 b 2 ? 0 ) 1 ( b 1 1 b 2 ? 1 ) x 1 1 u 1 b 2 r

It can be shown that, if we define v 5 u 1 b 2 r then E( v | x 1 ) 5 0, Var( v | x 1 ) 5 s 2 1 b 2 ? 2 . What consequences does this have for the t statistic on x 2 from the regression in

2

1

part (ii)?

    1. What do you conclude about adding a nonlinear function of x 1 —in particular,

1 —in an attempt to detect omission of x 2 ?

x 2

 

Answers

Maurice Tutor
(5)
Status NEW Posted 06 Jan 2018 04:01 PM My Price 9.00

Hel-----------lo -----------Sir-----------/Ma-----------dam-----------Tha-----------nk -----------You----------- fo-----------r u-----------sin-----------g o-----------ur -----------web-----------sit-----------e a-----------nd -----------acq-----------uis-----------iti-----------on -----------of -----------my -----------pos-----------ted----------- so-----------lut-----------ion-----------.Pl-----------eas-----------e p-----------ing----------- me----------- on-----------cha-----------t I----------- am----------- on-----------lin-----------e o-----------r i-----------nbo-----------x m-----------e a----------- me-----------ssa-----------ge -----------I w-----------ill----------- be-----------

Not Rated(0)
Relevent Questions