8. Suppose a researcher is interested in estimating the habit formation for ciga

Question

8. Suppose a researcher is interested in estimating the habit formation for cigarette smoking and estimating following model using a random sample: cigarette, = + /cigarette, + u where cigarette, and cigarate are the average number of cigarettes smoked per week this year and last year, respectively. Which of the following is true regarding the OLS estimator ? a) Using weekly rather than daily number of cigarettes smoked will make larger. b) Using weekly rather than daily number of cigarettes smoked will make smaller.

Explanation / Answer

Ans. a
This is because there is greater variability in daily consumption compared to weekly smoking. Hence, the correlation wil be stronger when we consider weekly data rather than daily data.

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