(Answered)-Suppose you have two data series, yi and xi for i = 1, ... ,N. - (2025 Updated Original AI-Free Solution

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Question

Suppose you have two data series, yi and xi for i = 1, ... ,N. Both are i.i.d: normal random variables and N = 1250. You believe the conditional mean of the logrithm of yi given xi is linear based on some theory.

(a) Can you use the OLS estimator? And how?

(b) If you need do some joint tests on the parameters, will you use the F or chi-square?distribution? Why?