The model: y* = ₀ + x + u, given u|x ˜ Normal(0, ²) and y = max(0, y*) represents a: A)ARCH model. B)GARCH model C) Tobit model D) logit model

Question

Quizplus · Accepted Answer

The given model is a Tobit model as it includes a latent variable y* which is truncated at 0 and the observed variable y is the maximum of 0 and y*. The term u|x in the model represents the error term with normal distribution and heteroskedasticity. The model: y* = 11eab06d_2542_f3e2_beed_b75430bfb812_TB2133_11 _0u200b + x 11eab06d_2542_f3e3_beed_51847d32fa0b_TB2133_11 + u, given u|x ˜ Normal(0, 11eab06d_2543_1af4_beed_535dcdd80461_TB2133_11 ²) and y = max(0, y*) represents a Tobit model.

The Model: Y* = 0​ + X

The Model: Y* = ₀ + X