Hi all,

I've been struggling a bit with the following problem:

The random variables X and Y are jointly distributed. Let and , where is the CEF and is the BLP. Determine whether the following is true or false: .

My working out is as follows:

We are given that

Hence, , assuming .

Is that okay? The zero covariance between espilon & U seems like a strange result to me, but there are no clues in my textbook.

Thanks!