Suppose that the true model is Y i = 1 X i + u i
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Suppose that the true model is
Yi = β1 Xi + ui ……………… (1)
but instead of fitting this regression through the origin you routinely fit the usual intercept present model:
Yi = α0 + α1Xi + vi ………………. (2)
Assess the consequences of this specification error.
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In deviation form the true model can be written as Now Therefore E ...View the full answer
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