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3.9. Consider the following formulations of the two-variable PRF: Model I: Yi = β1 + β2 Xi + ui Model II: Yi = α1 + α2 ( Xi − X¯ ) + ui a. Find the estimators of β1 and α1 . Are they identical? Are...

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3.9. Consider the following formulations of the two-variable PRF:

Model I: Yi = β1 + β2 Xi + ui

Model II: Yi = α1 + α2 ( Xi X¯ ) + ui

a. Find the estimators of β1 and α1 . Are they identical? Are their variances identical?

b. Find the estimators of β2 and α2 . Are they identical? Are their variances identical?

c. What is the advantage, if any, of model II over model I?

Answered Same Day Dec 25, 2021

Solution

David answered on Dec 25 2021
106 Votes
3.9. Consider the following formulations of the two-variable PRF:
Model I: Yi = β1 + β2 Xi + ui
Model II: Yi = α1 + α2 ( Xi − X¯ ) + ui
a. Find the estimators of β1 and α1 . Are they identical? Are their variances identical?
. Find the estimators of β2 and α2 . Are they...
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