Question

How does heteroskedasticity affect the theoretical properties of the OLS estimator?

How does heteroskedasticity affect the theoretical properties of the OLS estimator?

Homework Answers

Answer #1

Consequences of heteroskedasticity

1) OLS estimators are still unbiased & linear. But they are no longer BLUE, in both small & large samples .

Estimators don't have minimum variance & hence they are no longer efficient.

2) usual formulas of variance of OLS estimators are biased.& Overestimate true variance & standard deviation

3) this leads to inefficient forecasting.

Usual confidence intervals & hypothesis tests based on t& F distribution are unreliable, leads to wrong conclusions.confidence intervals are likely to be larger.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
How would including irrelevant variables in the multiple regression model affect the properties of the estimator?...
How would including irrelevant variables in the multiple regression model affect the properties of the estimator? What would happen to the estimator if relevant variables have in fact been omitted?
If the zero conditional mean assumption does not hold but homoskedasticity is satisfied, the OLS estimator...
If the zero conditional mean assumption does not hold but homoskedasticity is satisfied, the OLS estimator will still be BLUE. A)True B) False
Describe sampling distribution of the ols estimator
Describe sampling distribution of the ols estimator
When the conditions for linear regression are met, the OLS estimator is the BLUE estimator. Discuss...
When the conditions for linear regression are met, the OLS estimator is the BLUE estimator. Discuss this argument.
Derive the formula for the variance of the OLS estimator of β0
Derive the formula for the variance of the OLS estimator of β0
1) Which of the following does not generally decrease the variance of the OLS estimator of...
1) Which of the following does not generally decrease the variance of the OLS estimator of slope βˆ1? a) Increasing the variance of the error term, b) Increasing the sample size, c) None of the above, d) Increasing the variance of the independent variable 2) If the independent variable is a binary variable then which of the following is true? a)β0 is a population mean for the group with a value of 1 for the independent variable, b) β1 is...
a. If the OLS estimator is unbiased for the true population parameter, is the OLS estimate...
a. If the OLS estimator is unbiased for the true population parameter, is the OLS estimate necessarily equal to the population parameter? Explain your answer in detail. b. Suppose that the true population regression (data generating process) is given by Y i = B 0 + B 1 X i +u i . Further suppose that the population covariance between X i and u i is equal to some positive value A , rather than zero: COV(X i ,u i...
how does ionization affect the colligative properties of solution?
how does ionization affect the colligative properties of solution?
How does the size of the particles affect their optical properties?
How does the size of the particles affect their optical properties?
For the model ?? = ?1 + ?? , the OLS estimator of ?1 is ?̂1...
For the model ?? = ?1 + ?? , the OLS estimator of ?1 is ?̂1 = ?̅. Demonstrate that ?̂1 may be decomposed into the true value plus a linear combination of the disturbance terms in the sample. Hence demonstrate that it is an unbiased estimator of ?1.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT