The Gauss-Markov Theorem proves that
A)the OLS estimator is t distributed.
B)the OLS estimator has the smallest mean square error.
C)the OLS estimator is unbiased.
D)with homoskedastic errors,the OLS estimator has the smallest variance in the class of linear and unbiased estimators,conditional on X1,…,Xn.

Question

Quizplus · Accepted Answer

The Gauss-Markov Theorem states that under certain assumptions, the OLS estimator has the smallest variance in the class of linear and unbiased estimators, given the values of X1,...,Xn. This assumes homoskedastic errors, meaning that the variance of the error term is the same for all values of X. Therefore, choice D is the correct answer.

The Gauss-Markov Theorem Proves That