Consider the model where y = x + u, t= 1,.., T U =put-1+E, t=...,0,1,2,..., with...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider the model where y₁ = x₁ + u, t= 1,.., T U₁ =put-1+E, t=...,0,1,2,..., with lpl<1, and (e) is a sequence of i.i.d. disturbances, with E(e) = 0, Var(e) = o², vt. a) Explain how the above linear regression could be transformed to make the disturbances f.i.d. (when p is un- known). b) Discuss how p and ß could be estimated in the above model by Generalized Least Square (GLS) method. c) Discuss how you could estimate the above model by Maximum Likelihood Estimation (MLE) method, i.e. write down the log-likelihood function, replace the parameter o2 in the likelihood and derive the first order condi- tions. d) Do you need any additional assumptions in order to apply MLE? Consider the model where y₁ = x₁ + u, t= 1,.., T U₁ =put-1+E, t=...,0,1,2,..., with lpl<1, and (e) is a sequence of i.i.d. disturbances, with E(e) = 0, Var(e) = o², vt. a) Explain how the above linear regression could be transformed to make the disturbances f.i.d. (when p is un- known). b) Discuss how p and ß could be estimated in the above model by Generalized Least Square (GLS) method. c) Discuss how you could estimate the above model by Maximum Likelihood Estimation (MLE) method, i.e. write down the log-likelihood function, replace the parameter o2 in the likelihood and derive the first order condi- tions. d) Do you need any additional assumptions in order to apply MLE?
Expert Answer:
Answer rating: 100% (QA)
a To transform the above linear regression model to make the disturbances 11d we can use the CochraneOrcutt method The steps involved are as follows 1 ... View the full answer
Posted Date:
Students also viewed these economics questions
-
Under constant-volume conditions, the heat of combustion of benzoic acid (C6H5COOH) is 26.38 kJ/g. A 2.760-g sample of benzoic acid is burned in a bomb calorimeter. The temperature of the calorimeter...
-
The enthalpy of combustion of benzoic acid (C6H5COOH) is commonly used as the standard for calibrating constant-volume bomb calorimeters; its value has been accurately determined to be -3226.7...
-
Combustion gases with a specific heat ratio of 1.3 enter an adiabatic nozzle steadily at 800C and 800 kPa with a low velocity, and exit at a pressure of 85 kPa. The lowest possible temperature of...
-
If a particular glucose fermentation process is 87.0% efficient, how many grams of glucose would be required for the production of 51.0 g of ethyl alcohol (C 2 H 5 OH)? C 6 H 12 O 6 2C 2 H 5 OH +...
-
Use the Binomial Theorem to write the expansion of the expression. 1. (x + 5)3 2. (2t - 1)3 3. (x2/3 - y1/3)3
-
In Exercises, use the rules of differentiation to find the derivative of the function. g(a) 5 sin a 3 2
-
For over 20 years, movie critics Gene Siskel (formerly of the Chicago Tribune, now deceased) and Roger Ebert (Chicago Sun-Times) rated the latest film releases on national television, first on PBS...
-
What are the intangible factors that are important in evaluating a company's financial position and performance but are not available in the annual report?
-
On January 1 2021. Wright Transport sold four school buses to the Elmira School District. In exchange for the buses. Wright received a note requiring payment of $516.000 by Elmira on December 31,...
-
On July 1, 2015, Andrea Robson established an interior decorating business, Finishing Designs. During the month, Andrea completed the following transactions: July 1. Andrea transferred cash from a...
-
Denmark maintains a credible fixed exchange rate system and allows capital mobility. Explain the response of the Danish Central Bank when there is an increase in the real GDP of Denmark in the short...
-
What do you think of the gainsharing plan that Harrah's has implemented? How does an employee make more money? How much more money can they make? Is the gainsharing plan motivating employees to...
-
How do power dynamics within an organization affect employee empowerment and autonomy, and what are the best practices for creating a balanced power structure ?
-
In thinking about management and incentive structures: What recommendations do you have for the Responsible Innovation team as they seek to better embed responsible innovation within employees'...
-
How do multinational companies adapt their corporate governance procedures and decisions to accommodate the different national and regional regulatory requirements and business ethics? Requirement: I...
-
How do "complexity theory" and the concept of "emergent properties" inform our understanding of organizational dynamics, particularly in the context of nonlinear interactions and unpredictable...
-
Mr. Stevenson Smith is a Non- Resident in Fiji and has been employed as part time Water treatment Lab Advisor for Fiji Water. As part of his contract he receives the following for 2020. Salary of fjd...
-
QUESTION 2 The CEO of Farisha Hijab Sdn Bhd insisted on further investigation to be carried out that he also required Mr Muaz to conduct the analysis of variance for the material and labour of the...
-
4. Straight-line interest amortization of bond premiums and discounts is used as an expedient in this book. However, the effective interest rate method is generally required under GAAP. When using...
-
10. Provide computations to explain the $305,800 Investment in Son account balance on December 31, 2017.
-
5. Provide computations to explain the difference between the combined separate cost of sales and consolidated cost of sales.
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App