Chapter 8: Misspecified or Unknown Dispersion

The results of Chapters 3, 4 and 7 are based on the crucial assumption that the error dispersion matrix σ²V in the linear model (y, X β, σ²V) is known, up to the unspecified scale factor σ². The expression for the BLUE of an estimable parametric function, for instance, depends on this dispersion matrix and cannot be computed when the matrix V is unknown. As we shall see in this chapter however, there are many practical situations where the dispersion matrix is unknown…