1. Show that as given in equation 12.31. 2. Consider the model (a) Find the ordinary least squares estimator 0 . Compute Var( 0 ). (b) Find the appropriate transformation Y ∗ . (Hint: Consider Y i − Y...

1. Show that

as given in equation 12.31.

2. Consider the model

(a) Find the ordinary least squares estimator

₀. Compute Var(
₀).

(b) Find the appropriate transformation Y^∗. (Hint: Consider Y_i
− Y_i−1.)

(c) Find the generalized least squares estimator

₀,G of

₀.

(d) Compute Var(
₀,G) and compare it with Var(
₀).