Hi guys,
I know how to derive the GLS estimator of beta (theoretical GLS), but there a slight change to the question and i am not quite sure how to go about it.
A researcher has reason to believe that the disturbances in the standard model are heteroscedastic, with a threefold block-diagonal structure, such that:
Y1= X1\beta + U1
Y2= X2\beta + U2
Y3= X3\beta + U3
where Yi is Ti x 1,
Xi is Ti x k matrix of regressors,
Ui is a Ti x 1 vector of disturbances and
\beta is a k x 1vector of population regression coefficients assumed to be the same for each of the blocks.
Assume that the only departure from the standard assumptions is that:
E(UiUi')= \sigma^{2}_{i}ITi
where is the identity matrix of order .
My question is simply how to obtain the GLS estimator of \beta assuming that the \sigma^{2}_{i} are known.
any hints?
regards
GLS estimator of beta
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