On the Relationship between the Estimates of Level Models and Difference Models
1989
Maeshiro, Asatoshi | Wichers, Robert
This paper proves that if a linear regression model has a constant term and its disturbances have a positive‐definite variance‐covariance matrix, its slope coefficients have the same generalized least squares estimates as the slope coefficients of the corresponding difference model. It is also illustrated that if the original model is homogenous (i.e., with no constant term) and/or a constant term is inadvertently included in the difference model and/or the ordinary least squares estimator is adopted for the difference model, one can incur a great loss in estimation efficiency.
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