Consider an i.i.d. sample {(Xi, Yi)}n i=1 generated by the linear regression model: Yi = βXi Ui, E[Ui|Xi] = 0, Var(Ui|Xi) = σ2 > 0, where Xi is a scalar regressor. Assume that β 6 = 0 and ∑n i=1 X2 i > 0. The ridge estimator for β is given by βλ = ∑n i=1 XiYi ∑n i=1 X2 i λ , where λ ≥ 0 is a tuning parameter. Let X = (X1, ..., Xn). Answer the following questions without using the formulea for the bias and variance of the ridge estimator derived in class. Derive the bias of βλ, Bias( βλ|X) = E[ βλ|X]−β.



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