In a random effects model, define the composite error vit = ai + uit,, where ai is uncorre...

In a random effects model, define the composite error vit = ai + uit,, where ai is uncorrelated with uit and the uit have constant variance σ2u and are serially uncorrelated. Define eit = vit- . where λ is given in (14.10).

(i) Show that E(eit) = 0.

(ii) Show that Var(eit) = σ2u t = 1,...., T.

(iii) Show that for t ≠ s, Cov(eit, eis.) = 0.