[R] GLS terminology question not related to R
tlumley at u.washington.edu
Wed Apr 25 19:48:13 CEST 2007
On Wed, 25 Apr 2007, Leeds, Mark (IED) wrote:
> This is a terminology question not related to R. The literature often
> says that OLS is inefficient relative to GLS if the residuals in
> the system are correlated ( and the RHS sides of each are not identical
> ). Does this mean that OLS overestimates residual and coefficient
> variances , underestimates them or just gets them wrong and the
> direction is not known ? Thanks.
It does not mean either.
It means that the true variance of the OLS estimates is greater than the
true variance of the GLS estimates.
A separate issue is whether the estimated variance of an OLS estimator is
greater or less than the true variance of the OLS estimator. This can go
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