In the discussion of Harveys model in Section 11.7, it is noted that the initial

Chapter 11, Problem 10

(choose chapter or problem)

In the discussion of Harveys model in Section 11.7, it is noted that the initial estimator of 1, the constant term in the regression of ln e2 i on a constant, and zi is inconsistent by the amount 1.2704. Harvey points out that if the purpose of this initial regression is only to obtain starting values for the iterations, then the correction is not necessary. Explain why this statement would be true.

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