INTRODUCTION TO ECONOMETRICS II
ECO 306
NOUN
109 Note that there should not be a constant term in the equation. By regressing Y' on hand
X', you will obtain efficient estimates of
and
with unbiased standard errors.
3.1.3.7 Consequences of Heteroscedasticity
The seriousness of the consequences of heteroscedasticity will depend on the nature of the occurred heteroscedasticity, and there are no general rules. In the case of the heteroscedasticity, where the standard deviation of the disturbance term is proportional to Xand the values of Xare integers from 5 to 44. Here, the population variance of the OLS estimator of the slope coefficient is approximately double that of the estimator, where the heteroscedasticity has been eliminated by dividing through byX. Further, the standard errors of the OLS estimators are underestimated, giving a misleading impression of the precision of the OLS coefficients.
Share with your friends: |
