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Looking for some help with this question... topic: econometrics/stats. Thanks!
Suppose the Y = a + bX +U, where X and U are random variables and a and b are constants. Assume that E[U|X] = 0 and that Var[U|X) = X2
a. Is Y a random variable? Why?
b. Is U mean independent of X? Why?
c. Is U independent of X? Why?
d. Show the E[U] = 0 and that Var[U] = E[X2] (10 pts)
e. Show that E[Y|X] = a + bX and that E[Y] = a + bE[X]
f. Show that Var[Y|X] = X2 and that Var[Y] = b2Var[X] + E[X2]
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