solutions Introductory Econometrics for Finance Chris Brooks 2002 ch3.doc

’“best”,(providedtheassumptionsarefulfilled)isknownastheGauss-(whichisdealtwithinChapter4),thenitmaybethatOLSestimatorsarenolongerunbiasedor“efficient”.Thatis,,thatthedisturbancesarenormallydistributed,inordertomakestatisticalinferencesaboutthepopulationparametersfromthesampledata,-distribution(providedthattheotherassumptionsalsohold).,wecanuseOLS.(1)Yes,canuseOLSsincethemodelistheusuallinearmodelwehavebeendealingwith.(2),ithassoundtheoreticalfoundations(-Douglasproductionfunctionineconomics),anditisthecasethatmanyrelationshipscanbe“approximately”,anditmaybepossiblet