Consider the following regression model Yi0+1Xi+2Zi+i1.pdf

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Consider the following regression model. Yi=0+1Xi+2Zi+i=1,,n where Yi,Xi,Zi are i.i.d.& E(i/xizi)=0 E(i2/xizi)=2xi4 a. What is the meaning of the expression "an estimator is said to be BLUE"? [2 marks] b. Using the acronym BLUE, demonstrate and explain how you would derive the L component for the estimator in this regression model? [10 marks] Question 2 (i) Consider the multiple regression containing three independent variables: Y=0+1X1+2X2+ You are interesting in estimating the sum of the parameters on X1 and X2 call this ^1=1+2. a. Show that ^1=1+2 [5 marks] b. Are 1+2 unbiased estimator of 1. [2 marks].

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