Question

7. True/False a. If Cov(x,u)>0, then the OLS estimator βι will then to be higher than β b. Suppose you run a regression and obtain the estimate B1 - 3.4. Stata tells you that the test statistic for the null hypothesis that B12 is equal to 2. This implies that the standard error of the slope coefficient is also equal to 2.

Answer 1

7. a) True

7. b) test statistic = $\frac{\hat{\beta_1}-2}{SE(\hat{\beta_1})} = \frac{3.4 - 2}{SE(\hat{\beta_1})} = \frac{1.4}{SE(\hat{\beta_1})}$

$\Rightarrow 2=\frac{1.4}{SE(\hat{\beta_1})}$

$\Rightarrow SE(\hat{\beta_1}) = \frac{1.4}{2} = 0.7$

ans-> False