ECON 710 Midterm: ECON 710 UW Madison Midterm 2010
Document Summary
March 11, 2010: an economist friend tells you that the assumption that the observations (yi; xi) are iid implies i(cid:12) + ei is homoskedastic. How that the regression yi = x0 would you explain your position: you estimate a least-squares regression yi = x0. ~(cid:12)1 + ~ui and then regress the residuals on another set of regressors. ^(cid:12)2 + ^ei: out of an iid sample (yi; xi) of size n; you randomly take half the observations and estimate the least-squares regression of yi on xi using only this sub-sample. yi = x0 i. Ex- plain your reasoning: you have two regressors x1 and x2, and estimate a regression with all quadratic terms yi = (cid:11) + (cid:12) 1x1i + (cid:12) 2x2i + (cid:12) 3x2.
