A classmate is interested in estimating the variance of the
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A classmate is interested in estimating the variance of the error term in Equation (12.1). a. Suppose that she uses the
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A classmate is interested in estimating the variance of the error term in Equation (12.1). a. Suppose that she uses the estimator from the second-stage regression of TSLS: sn 2 a = 1 n - 2gn i = 1(Yi - bnTSLS 0 - bnTSLS 1 Xn i ) 2 , where Xn i is the fitted value from the first-stage regression. Is this estimator consistent? (For the purposes of this question, suppose that the sample is very large and the TSLS estimators are essentially identical to b0 and b1.) b. Is sn 2 b = 1 n - 2gn i = 1(Yi - bnTSLS 0 - bnTSLS 1 Xi ) 2 consistent?
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