The generalized least square (GLS) is an efficient procedure that weights each squared residual by the: A)conditional variance of u_i given x_i. B)expected value of u_i given x_i. C)inverse of the conditional variance of u_i given x_i. D)square root of the inverse of the conditional variance of u_i given x_i.

Question

Quizplus · Accepted Answer

GLS assigns higher weights to observations that have low variance and lower weights to observations that have high variance. Therefore, each squared residual is weighted by the inverse of the conditional variance of the error terms given the values of the independent variables. Therefore, option C, which states that GLS weights each squared residual by the inverse of the conditional variance of u_i given x_i is the best choice.

The Generalized Least Square (GLS) Is an Efficient Procedure That