Properties of the OLS estimator

Question 1

What makes an estimator “unbiased”?

Answer 1

It’s expected value is equal to the unknown true value

Question 2

What makes an estimator “efficient”

Answer 2

It has the lowest possible variance in the class of estimators

Question 3

What are the Gauss-Markov assumptions?

Answer 3

• The error has expected value zero
• The errors are serially uncorrelated
• The errors have constant variance
• The X variable is non stochasic

Question 4

What do we need to test a hypothesis?

Answer 4

• A hypothesis to be tested
• A test statistic whose distribution is known
• A decision rule which tells us when to reject or not reject the null hypothesis

Question 5

What are the four possible outcomes when we perform a test?

Answer 5

• True negative
• False negative
• True positive
• False positive

Question 6

What is a critical value?

Answer 6

A value corresponding to a predetermined p-value