An investigator estimates the

An investigator estimates the following equation using OrdinaryLeast Squares from time series data: Y1 = a0 + a1X1t + a2X2t + UtThe following scenarios represent violations of the CLRMassumptions. For each scenario, state the underlying assumptionbeing referred to and state the null hypothesis of that assumption.i- There is another important variable, which has been omitted. ii-X1 and X2 are correlated iii- Ui is correlated with its own pastvalues. iv- The mean value of the residual from the regression isequal to 1 Please help

i) there is another important variable which has been omitted.say that is X3

i.e. the true model will beyt=a0+a1x1t+a2x2t​​​​+a3x3t​​​​+ut

But if we will use theprevious model, then E(ut)is not equal to zero, so thatassumption will be violated.

hereE(ut)=E(yt-a0+a1x1t+a2x2t​​​​)=E(yt)-a0+a1x1t+a2x2t​​​​=a0+a1x1t+a2x2t​​​​+a3x3t-(a0+a1x1t+a2x2t​​​​)=a3x3t​​​​

which is not equal to zero as x3 is a importantvariable.

null hypothesis will be H0:a3=0

ii) x1 and x2 are correlated. i.e. these two regressors can beexpressed by each other.

i.e. there is a problem of multicollinearity involved in thedata,so that assumption is violated in this case.

null hypothesis will be H0:cov(x1,x2)=0

iii)Ui is correlated with its own past values. that means Ui’sare not independent .

i.e. there is a problem of auto correlation in the data. thatassumption is violated.

null hypothesis will be H0:cov(ui,uj)=0,for all i ≠k

iv) E(ut)=1

but we know mean value of residual should be 0; that assumptionis violated here.

null hypothesis will be H0:E(ut)=0,

"Our Prices Start at \$11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"

Pages (275 words)
Standard price: \$0.00
Client Reviews
4.9
Sitejabber
4.6
Trustpilot
4.8
Our Guarantees
100% Confidentiality
Information about customers is confidential and never disclosed to third parties.
Original Writing
We complete all papers from scratch. You can get a plagiarism report.
Timely Delivery
No missed deadlines – 97% of assignments are completed in time.
Money Back
If you're confident that a writer didn't follow your order details, ask for a refund.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
\$0.00
Power up Your Academic Success with the
Team of Professionals. We’ve Got Your Back.
Power up Your Study Success with Experts We’ve Got Your Back.