On Wed, 25 Apr 2007, Leeds, Mark (IED) wrote: > This is a terminology question not related to R. The literature often > says that OLS is inefficient relative to GLS if the residuals in > the system are correlated ( and the RHS sides of each are not identical > ). Does this mean that OLS overestimates residual and coefficient > variances , underestimates them or just gets them wrong and the > direction is not known ? Thanks.
It does not mean either. It means that the true variance of the OLS estimates is greater than the true variance of the GLS estimates. A separate issue is whether the estimated variance of an OLS estimator is greater or less than the true variance of the OLS estimator. This can go either way. -thomas ______________________________________________ R-help@stat.math.ethz.ch mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.