In the model y_t = α₀ + α₁x_t1 + α₂x_t2 + …..+ α?_kx_tk + u_t,the explanatory variables,x_t = (x_t1,x_t2 …. ,x_tk),are sequentially exogenous if: A)E(u_t|x_t,x_t-1,……)= E(u_t)= 0,t = 1,2,…. B)E(u_t|x_t,x_t-1,……)≠ E(u_t)= 0,t = 1,2,…. C)E(u_t|x_t,x_t-1,……)= E(u_t) 0,t = 1,2,…. D)E(u_t|x_t,x_t-1,……)= E(u_t)= 1,t = 1,2,….

Question

In the model y_t = α₀ + α₁x_t1 + α₂x_t2 + …..+ α?_kx_tk + u_t,the explanatory variables,x_t = (x_t1,x_t2 …. ,x_tk),are sequentially exogenous if: A)E(u_t|x_t,x_t-1,……)= E(u_t)= 0,t = 1,2,…. B)E(u_t|x_t,x_t-1,……)≠ E(u_t)= 0,t = 1,2,…. C)E(u_t|x_t,x_t-1,……)= E(u_t)> 0,t = 1,2,…. D)E(u_t|x_t,x_t-1,……)= E(u_t)= 1,t = 1,2,….

Quizplus · Accepted Answer

Sequential exogeneity means that the conditional expectation of the error term at time t, given the explanatory variables up to time t and all lagged values of the explanatory variables, is equal to 0. Choice A reflects this definition. Choice B indicates that the conditional expectation of the error term is not equal to 0, which contradicts the definition. Choice C suggests that the conditional expectation of the error term is positive, which is also not in line with the definition. Choice D is incorrect because the conditional expectation of the error term cannot be equal to 1.

In the Model Yt = α0 + α1xt1 + α2xt2

In the Model Y_t = α₀ + α₁x_t1 + α₂x_t2