Consider the constant-term-only regression model Yt = 0 + ut, where ut follows the stationary AR(1) model

Consider the "constant-term-only" regression model Yt = β0 + ut, where ut follows the stationary AR(1) model

with mean 0 and variance

a. Show that the OLS estimator is

b. Show that the (infeasible) GLS estimator is β0GLS =

c. Show that β0GLS can be written as β0GLS =

d. Derive the difference β0 - β0GLS and discuss why it is likely to be small when T is large.

Transcribed Image Text:

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