An Illustration of the Bias of OLS for y(t) = By(t-1) + e(t)

Volume: Volume 31, No. 1

Issue: Winter 2000

Pages: 76-80

Author(s): Asatoshi Maeshiro (University of Pittsburgh)

Address (Principal Author):Asatoshi Maeshiro
Professor of Economics
Department of Economics
University of Pittsburgh
Pittsburgh, PA 15260
412-648-1756
fax: 412-648-1793

Internet Address (Principal Author):aiueo@vms.cis.pitt.edu

Title: An Illustration of the Bias of OLS for y(t) = By(t-1) + e(t)

Abstract: A pedagogical device is used to illustrate the bias of the OLS estimator for the first-order stochastic difference equations. The device employs a dichotomous disturbance-generating process that enables students to find the expected value of the estimator by summation.

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