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Suppose that the regression model is y = μ + ε, where ε has a zero mean, constant variance, and equal correlation ρ across observations. Then Cov [εi, εj] = σ2ρ if i ≠ j . Prove that the least squares estimator of μ is inconsistent. Find the characteristic roots of Ω and show that Condition 2 after Theorem 10.2 is violated. |
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