medium · Quantitative Finance
If the true population model is y = α + β x + ε, but the errors ε_i are correlated with the predictor x_i, what is the status of the OLS estimator?
- The R² will be exactly zero.
- It is biased and inconsistent.
- It is still consistent but the standard errors are wrong.
- It remains unbiased but is no longer BLUE.
Sign up free to see the explanation and track your rank →
More Quantitative Finance practice
- If the underlying stock price S moves by +$2.00 over a very short interval, what is the es
- What is the estimated OLS slope hatβ?
- If the flat yield curve is at 4% (continuously compounded), what is the bond's price?
- As the number of assets n approaches infinity, what happens to the total portfolio varianc
- What is the fair no-arbitrage price for a six-month (T = 0.5) forward contract?
- If the risk-neutral probability of an up move is p = 0.6 and the risk-free rate is zero, w
- When pricing a 'Digital' (or Binary) call option near expiry with the spot price very clos
- Calculate the price of a zero-coupon bond that pays $1000 in two years, given that the one