Explain the implications for the disturbance terms

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Reference no: EM131161520

A researcher is considering the following alternative regression models:

(a) Show that models (2) and (3) are restricted versions of model (1), stating the restrictions.

(b) Explain the implications for the disturbance terms in (1) and (2) if (3) is the correct specification and wt satisfies the Gauss-Markov conditions. What problems, if any, would be encountered if ordinary least squares were used to fit (1) and (2)?

Reference no: EM131161520

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