Consider the system y 1 = 1 + x + 1 , y 2 =
Question:
Consider the system
y1 = α1 + βx + ε1,
y2 = α2 + ε2.
The disturbances are freely correlated. Prove that GLS applied to the system leads to the OLS estimates of α1 and α2 but to a mixture of the least squares slopes in the regressions of y1 and y2 on x as the estimator of β.What is the mixture? To simplify the algebra, assume (with no loss of generality) that x̅ = 0.
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The model is The GLS estimator of the full coefficient vec...View the full answer
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