Consider the three-variable linear regression model Y = Bo +BX + BX, tui (i) (ii) (iii)...
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Consider the three-variable linear regression model Y = Bo +BX + BX, tui (i) (ii) (iii) In the presence of perfect multicollinearity, show that b₁, the least-squares estimator of P₁, is indeterminate. [6 marks] Show that the variance of b₁, the least-squares estimator of ₁, can be written as V (b₁) = u (1-13) Σε [4 marks] Using the result in part (ii), determine what happens to the variance of b₁ as the extent of collinearity increases. [2 marks] Briefly describe three methods of detecting multicollinearity. [8 marks] Activate Windo Go to Settings to act Consider the three-variable linear regression model Y = Bo +BX + BX, tui (i) (ii) (iii) In the presence of perfect multicollinearity, show that b₁, the least-squares estimator of P₁, is indeterminate. [6 marks] Show that the variance of b₁, the least-squares estimator of ₁, can be written as V (b₁) = u (1-13) Σε [4 marks] Using the result in part (ii), determine what happens to the variance of b₁ as the extent of collinearity increases. [2 marks] Briefly describe three methods of detecting multicollinearity. [8 marks] Activate Windo Go to Settings to act
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Answer rating: 100% (QA)
Answer Let solve the question step by step STEP 1 In the presence of perfect multicollinearity the model is as follows Y B2 B1X1 B2X2 u Perfect multic... View the full answer
Related Book For
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson
Posted Date:
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