(a) Suppose that Model 1 is true. If we estimates OLS estrimator for in Model 2, what will happen to the size and power properties of the test?
(b) Suppose that Model 2 is true. If we estimates OLS estrimator for in Model 1, what will happen to the size and power properties of the test?
-> Here is my guess.
(a) is unbiased, inefficient estimator. (I calculated it using formula for "inclusion of irrelevant variable" and where is symmetric and idempotent matrix) Inefficient means that it has larger variance thus size increases and power increases too.
(b) is biased, efficient estimator. (I use formular for "exclusion of relevant variable" and ) Um... I stuck here. What should I say using that information?
Let and be the quantity and price. Relation between them is different across reions of east, west, south and north, and as well, for different 4 seasons. Construct a model.
-> Actually, I don't know well about dummy variables. So any please solve this problem to help me.