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Consider the following regression model:
We assume that the errors {uj}”=1 are independent normal random variables with zero mean and variance cr2/X?. The regressor, 1/Xi, is non-stochastic with positive sample variability. You are interested in testing the hypothesis Ho : 0O = 0 against Hi : /30 0. You are advised to use the BLUE estimator of /30 for this purpose.
Discuss how you would obtain the BLUE estimator of (note, you are not asked to derive this estimator).
Give two reasons why you would prefer using the BLUE estimator for f30 instead of the OLS estimator /?OOLS = Y - when testing this hypothesis, where
y = and(T7E) = (8marks)
Consider the following regression model:
We assume that the errors {uj}”=1 are independent normal random variables with zero mean and variance cr2/X?. The regressor, 1/Xi, is non-stochastic with positive sample variability. You are interested in testing the hypothesis Ho : 0O = 0 against Hi : /30 0. You are advised to use the BLUE estimator of /30 for this purpose.
Discuss how you would obtain the BLUE estimator of (note, you are not asked to derive this estimator).
Give two reasons why you would prefer using the BLUE estimator for f30 instead of the OLS estimator /?OOLS = Y - when testing this hypothesis, where
y = and(T7E) = (8marks)
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