This lecture covers the material related to the simple linear regression:
➢ Estimation of coefficients
➢ Unbiasedness, Efficiency, and Monte Carlo Experiments
➢ Testing hypothesis on coefficients
➢ Testing the goodne
...
This lecture covers the material related to the simple linear regression:
➢ Estimation of coefficients
➢ Unbiasedness, Efficiency, and Monte Carlo Experiments
➢ Testing hypothesis on coefficients
➢ Testing the goodness of fit of a linear regression
This lecture will cover chapters 1 and 2 of the Dougherty textbook. Understanding this material is essential for understanding how the more complicated version of the model presented in the following chapters works.
Y
Y =?1 + ?2 X
1
X1 X2 X3 X4 X
Suppose that a variable Y is a linear function of another variable X, with unknown parameters 1 and 2 that we wish to estimate.
Suppose that we have a sample of 4 observations with X values as shown.
Y
Y =?1 + ?2 X
1
X1 X2 X3 X4 X
If the relationship were an exact one, the observations would lie on a straight line and we would have no trouble obtaining accurate estimates of 1 and 2.
Y
Y =?1 + ?2 X
1
X1 X2 X3 X4 X
In practice, most economic relationships are not exact and the actual values of Y are different from those corresponding to the straight line.
............................................CONTINUED................................................
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