Let x be a binary explanatory variable and suppose P(x = 1) = for 0 <
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Let x be a binary explanatory variable and suppose P(x = 1) = ρ for 0 < ρ < 1.
(i) If you draw a random sample of size n, find the probability—call it γn—that Assumption SLR.3 fails.
(ii) If ρ = 0.5, compute the probablity in part (i) for n = 10 and n = 100. Discuss.
(iii) Do the calculations from part (ii) with ρ = 0.9. How do your answers compare with part (ii)?
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i Assumption SLR3 fails if the sample proportion of observations with x 1 is not equal t...View the full answer
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Related Book For
Introductory Econometrics A Modern Approach
ISBN: 9781337558860
7th Edition
Authors: Jeffrey Wooldridge
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