alexyflemming
09-28-2011, 07:07 AM
William Greene, Econometric Analysis, 7th edition, 20th page:
The zero conditional mean implies that the unconditional mean is also zero, since
E[εi ] = Ex[E[εi |X]] = Ex[0] = 0.
http://www.mediafire.com/i/?9388ajs4h3zci93 (http://www.mediafire.com/i/?9388ajs4h3zci93)
Problem: E[εi ] = Ex[E[εi |X]] is NOT clear. Please, explain in detail the steps from passing E[εi ] to Ex[E[εi |X]] .
(Note: Ex[E[εi |X]] = Ex[0] is clear since it is from the assumption, and then, later, by the property of Expected Value)
The zero conditional mean implies that the unconditional mean is also zero, since
E[εi ] = Ex[E[εi |X]] = Ex[0] = 0.
http://www.mediafire.com/i/?9388ajs4h3zci93 (http://www.mediafire.com/i/?9388ajs4h3zci93)
Problem: E[εi ] = Ex[E[εi |X]] is NOT clear. Please, explain in detail the steps from passing E[εi ] to Ex[E[εi |X]] .
(Note: Ex[E[εi |X]] = Ex[0] is clear since it is from the assumption, and then, later, by the property of Expected Value)