Suppose you are interested in studying the relationship between education and wa

Question

Suppose you are interested in studying the relationship between education and wage. More specifically, suppose that you believe the relationship to be captured by the following linear regression model, Wages Po + | Education + u Suppose further that you estimate the unknown population linear regression model by OLS What is the difference between 1 and ? O A. p, is a true population parameter, the slope of the population regression line, while is the OLS estimator of p OB. is a true population parameter, the slope of the population regression line, while p, is the OLS estimator of p OD. Both, pi and pr, are OLS estimators of true parameters of the population regression line Both, 1 and 1 , are true parameters of the population regression line. ..

Explanation / Answer

Option A is correct.

With linear regression, we imply that there is one specific variable that is used as a model like sales of a product or price of stock of a firm which is called target variable or dependent variable. To predict or estimate its value we must think of other variables which are useful in making this prediction about the target variable. Here B1 is the population parameter and B1^ is the OLS estimator of the population parameter.

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