4. Inconsistency in OLS: An example Consider the following model, which satisfie

Question

4. Inconsistency in OLS: An example Consider the following model, which satisfies the first four Gauss-Markov assumptions: pctstck is the percentage cf a worker's pension invested in the stock market funds is the number of mutual funds that the worker can choose from riskaversion is measure of risk aversion (larger riskaversion means tho person has a lower risk praference) Suppose the estimated model is as follows: positive negative f funds and riskaversion are negatively correlated, the inconsistency in B, is therefore mutual funds implies a greater risk than keeping the funds in money market funds.) ·(Note: It is assumed here that investing in

Explanation / Answer

If funds and riskaversion are negatively correlated, this implies that there is a negatove inconsistency in beta1

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