Question: Suppose that the true model is Y i = 1 X i + u i (1) but instead of fitting this regression through

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.

Step by Step Solution

★★★★★

3.44 Rating (163 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

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

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (2 attachments)

PDF file Icon

1529_605d88e1d6477_665993.pdf

180 KBs PDF File

Word file Icon

1529_605d88e1d6477_665993.docx

120 KBs Word File

Students Have Also Explored These Related Econometrics Questions!

Q:

Suppose that the true model is Y i = 1 + 2 X 2i + u i but we add an irrelevant variable X 3 to the model (irrelevant in the sense that the true 3 coefficient attached to the variable X 3 is zero)...

Q:

Continue with Exercise 13.2 but assume that it is model (2) that is the truth. Discuss the consequences of fitting the mis-specified model (1). In exercise 13.2 Suppose that the true model is Y i = ...

Q:

Comparison of Alternatives Using Net Present Value Analysis Kinglsey Products, Ltd., is using a model 400 shaping machine to make one of its products. The company is expecting to have a large...

Q:

Measures of Fit Two complementary measures of how well the regression line \"fits\" the data: a regression R2 measures the fraction of the variance of Y that is explained by X a standard error of the...

Q:

Linear regression analysis 3. Consider a multiple linear regression model with standard assumptions and notations. If we overfit the model, i.e., fit more variables than the ones in the true model,...

Q:

Code the function greedy_predicator without using numpy/pandas Please include explanation of the code & the computational complexity To see the description of the function: Scroll down the...

Q:

Login Required user id password Login Forgotten your password? ECONOMICS 2123B - ECONOMETRICS II LECTURE 5: SPECIFICATION OF REGRESSION VARIABLES George Orlov Department of Economics Western...

Q:

1 2 3 4 7 8 9 12 13 14 15 16 17 18 19 20 21 22 23 24 28 29 30 31 38 40 41 44 47 48 49 50 51 62 63 64 66 67 68 69 70 71 73 74 76 77 78 79 80 81 82 85 86 87 88 89 90 91 92 93 94 95 99 100 101 104 105...

Q:

ECO 578 EXAM SPRING 2016 Page 1 of 20 Name: _______________ ID: _______________ Final Exam Final Exam There are 4 parts: Part A: Select the correct answer for the following questions (1-11) Part B:...

Q:

Create charts to better understand data sets. For cross-sectional data, use a scatter chart. For time series data, use a line chart. Linear y = a + bx Logarithmic y = ln(x) Polynomial (2nd order) y =...

Q:

Why have the incidents of data loss seen a rise in the past few years?

Q:

Assume that Rex Corp. is operating at a capital intensity ratio of 63.5 percent and is able to generate net sales of $3,123,443. What is the book value of the firms assets?

Q:

Under the AICPA Code of Professional Conduct, what is the primary approach to mitigating threats to independence? Completely avoiding any financial relationships with clients. Evaluating the...

Q:

14 What does the poverty rate measure? Describe three potential problems in interpreting the measured poverty rate.

Q:

Identify all the problems Target Canada encountered that prevented it from becoming a successful retailer. What were the management, organization, and technology factors that contributed to these...

Q:

How much of Target Canadas problems were technology based? Explain your answer.

Q:

How responsible was management for Target Canadas problems? Explain your answer.

Q:

Alpha Inc has just issued a 15-year bond with $1,000 par value, which pays the amount below as annual coupon (interest). The market price of the bond and your required rate of return are also...

Q:

Need help with this Allison and Leslie, who are twins, just received $50,000 each for their 23th birthday. They both have aspirations to become millionaires. Each plans to make a $5,000 annual...

Q:

the answers inputted are corrext. looking for the empty 3 Suppose your company needs to raise $41.6 million and you want to issue 20 -year bonds for this purpose. Assume the required return on your...