OLS - Why coefficient Beta has Normal Distribution but not t-Distribution I have a little trouble understanding the solution to the following problem. To my understanding, coefficients in OLS should follow t-distribution. However, the solution says it follows Normal.
Please see the answer in the picture


The result shown is correct. Indeed, in general, for any true error variance $\sigma^2$ and under the usual linear model assumptions,
$$
\hat\beta \sim N_p(\beta, \sigma^2(X^\top X)^{-1}),
$$
where $\beta = (\beta_1,\ldots,\beta_{p})$. On the other hand, for a single component of $\hat\beta$, say $\hat\beta_r$, we have that
$$
\hat\beta_r \sim N(\beta_r, \sigma^2(X^\top X)^{-1}_{rr}),
$$
where $(X^\top X)^{-1}_{rr}$ denotes the $r$th element of the diagonal of the matrix $(X^\top X)^{-1}$, $r=1,\ldots,p$. Now the $t$-Student distribution comes in when you wish to perform inference on $\beta_r$. Indeed, given the pivot
$$
\frac{(n-p)\hat S^2}{\sigma^2}\sim \chi_{n-p}^2, 
$$
under the assumption of the linear model, we have the following pivot for $\beta_r$
$$
\frac{\frac{\hat\beta_r-\beta_r}{\sqrt{\sigma^2(X^\top X)_{rr}^{-1}}}}{\sqrt{S^2/\sigma^2}} = \frac{\hat\beta_r-\beta_r}{\sqrt{S^2(X^\top X)_{rr}^{-1}}}\sim t_{n-p}\,\tag{*}
$$
It is in (*) where you encounter the $t$-Student distribution concerning the OLS estimator.
