Question: Applied statistics 3. Let D be an indicator variable that takes only the values of zero or one, and let Y be a continuous random

Applied statistics

3. Let D be an indicator variable that takes only the values of zero or one, and let Y be a continuous random variable. (a) Rewrite Cov( D, Y) in terms of Var(D), E[Y |D = 1], and E[Y | D = 0]. Show your steps. (b) Consider the linear regression model Y = Bo+ BID+e E[&|D] = 0 Write the linear projection coefficients Bo and B1 in terms of Var(D), E[Y | D = 1], EY|D = 0]. (c) Is the linear model a plausible specification for the conditional mean if the regres- sor is a dummy variable

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