Consider the model: y_t = α₀ + α₁r_t1 + α₂r_t2 + u_t.Under weak dependence,the condition sufficient for consistency of OLS is: A)E(r_t1|r_t2)= 0. B)E(y_t |r_t₁,r_t₂)= 0. C)E(u_t |r_t₁,r_t₂)= 0. D)E(u_t |r_t₁,r_t₂)= ∞.

Question

Quizplus · Accepted Answer

Under weak dependence, the sufficient condition for consistency of OLS is that the errors (residuals) are uncorrelated with the regressors. Therefore, choice C is the correct answer as it represents the condition that the error term u is uncorrelated with the regressors r1 and r2. Choice A and B are not correct because they involve conditional expectations of the dependent variable, while the sufficient condition for consistency depends on the error term. Choice D is not correct as the error term should have a finite expected value.

Consider the Model: Yt = α0 + α1rt1 + α2rt2

Consider the Model: Y_t = α₀ + α₁r_t1 + α₂r_t2