ECON 710 Midterm: ECON 710 UW Madison Midterm 2006
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March 9, 2006: let y be n 1, x be n k, and x = xc where c is k k and full-rank. Let be the ls estimator from the regression of y on x, and let v be the estimate of its asymptotic covariance matrix. Let and v be those from the regression of y on x . Derive an expression for v as a function of v : you have a random sample from the model yi = xi 1 + x2 i 2 + ei. E (ei | xi) = 0 where yi is wages (dollars per hour) and xi is age. Describe how you would test the hypothesis that the expected wage for a 40-year-old worker is an hour. You do not need to derive the theory behind your procedure: take the standard model yi = x0. For a positive function w(x), let wi = w(xi). Find the probability limit (as n ) of .
