Suppose that the true model is Y i = 1 X i + u i

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Suppose that the true model is

Y_i = β₁ X_i + u_i ……………… (1)

but instead of fitting this regression through the origin you routinely fit the usual intercept present model:

Y_i = α₀ + α₁X_i + v_i ………………. (2)

Assess the consequences of this specification error.

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Basic Econometrics

ISBN: 978-0073375779

5th edition

Authors: Damodar N. Gujrati, Dawn C. Porter

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Question Posted: May 28, 2018 07:14 AM

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Suppose that the true model is Y i = 1 X i + u i

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In deviation form the true model can be written as Now Therefore E ...View the full answer

Basic Econometrics

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