ECOM023 Econometrics

Exercise Sheet 1: Solutions

R.G. Pierse

Q1.

(a) 2
3
2
q0 q = 2 4 1 4 4 5 = 2 2 + 4 4 + 1 1 = 21
1

(b)
2 3
2
qq0 = 4 4 5 2 4 1
1
2 3
2 2 2 4 2 1
= 4 4 2 4 4 4 1 5
1 2 1 4 1 1
2 3
4 8 2
= 4 8 16 4 5
2 4 1

(c)
tr(qq0 ) = 4 + 16 + 1 = 21

(d)
rank(q) = 1

since q is of dimension 3 1 and so has only one linearly independent

column.
 Therefore
rank(qq0 ) = 1
since
rank(AB) 6 min(rank(A); rank(B)):
Multiplying one matrix by another cannot increase the rank of a ma-

trix.

Q2.

(a)
(i)
M = In X(X0 X) 1 X0
0
M0 = I0n X00 (X0 X) 1 X0
= In X(X0 X) 1 X0

since In and (X0 X) 1

are both symmetric and A00 = A.

(ii)

MM = (In X(X0 X) 1 X0 )(In X(X0 X) 1 X0 )

= In In In X(X0 X) 1 X0 X(X0 X) 1 X0 In
+X(X0 X) 1 X0 X(X0 X) 1 X0
= In 2X(X0 X) 1 X0 + X(X0 X) 1 X0 = M:

(b)

tr(M) = tr(In X(X0 X) 1 X0 )

= tr(In ) tr(X(X0 X) 1 X0 )
= tr(In ) tr(X0 X(X0 X) 1 )
= tr(In ) tr(Ik )
= n k:

2
Q3.

(a) To show: AA = A.

0:5 0:5 0:5 0:5

AA =
0:5 0:5 0:5 0:5
0:5 0:5 + 0:5 0:5 0:5 0:5 + 0:5 0:5
=
0:5 0:5 + 0:5 0:5 0:5 0:5 + 0:5 0:5
0:5 0:5
= =A
0:5 0:5

(b)
tr(A) = a11 + a22 = 0:5 + 0:5 = 1
a11 a12
= a11 a22 a12 a21 = 0:5 0:5 0:5 0:5 = 0
a21 a22
(c)
The eigenvalues of A are found by solving the equation

jA Ij = 0

for .
a11 a12
jA Ij =
a21 a22
= (a11 )(a22 ) a12 a21 = 0:

In this case

(0:5 )(0:5 ) 0:5 0:5

= 0:25 + 2 0:25
= 2 = 0:

Clearly there are two solutions to this equation: = 1 and = 0 so

these are the two eigenvalues of A: 1 and 2 . Note that we have that

1 + 2 = 1 = tr A

3
and
1 2 = 0 = jAj
as expected. These are properties of any idempotent matrix which
always has eigenvalues that are either 0 or 1 in magnitude.

Q4.

(a)
@f (x) @ 0
= [x Ax + b0 x + x0 b + c] :
@x @x
Taking the elements term by term and using results from lecture notes
we have
@ 0
[x Ax] = Ax + A0 x
@x
= 2Ax

since A is symmetric, and

@ 0
[b0 x] = (b0 ) = b:
@x
Considering the third term, note that x0 b is a scalar so that
0
x0 b = (x0 b) = b0 x

and so
@ 0 @
[x b] = [b0 x] = b:
@x @x
Therefore, putting all the terms together, we have

@f (x)
= 2Ax + 2b: (1)
@x
(b)

Solving
@f (x)
= 2Ax + 2b = 0
@x

4
and using the result that A is nonsingular, we have

x = A 1 b:

(c)

Di¤erentiating (1) again with respect to x gives

@ 2 f (x) @
0
= [2Ax + 2b]
@x@x @x
= 2A0 = 2A:

If the matrix A is positive-de…nite, then the solution x is a minimum

(the function is bowl shaped). If the matrix A is negative-de…nite,
then the solution x is a maximum (the function is in the shape of an
inverted bowl). Otherwise, the solution x is a saddle point.