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.