Question: 14.3 In a random effects model, define the composite error vit ai uit, where ai is uncorrelated with uit and the uit have

14.3 In a random effects model, define the composite error vit ai uit, where ai is uncorrelated with uit and the uit have constant variance u 2 and are serially uncorrelated. Define eit vit v¯i , where is given in (14.10). (i) Show that E(eit) 0. (ii) Show that Var(eit) u 2, t 1, ..., T. (iii) Show that for t s, Cov(eit,eis) 0.

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