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class2-06

# class2-06 - Econ 444 Monday September 25 class 2 Econ 444...

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Econ 444, Monday September 25, class 2 Econ 444, Monday September 25, class 2 Robert de Jong 1 1 Department of Economics Ohio State University Robert de Jong Econ 444, Monday September 25, class 2

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Econ 444, Monday September 25, class 2 First: 1 discussion of “important dates” 2 splitting class into two groups for computer exercise 3 exercise for today Main class topic today: how to draw the regression line Robert de Jong Econ 444, Monday September 25, class 2
Econ 444, Monday September 25, class 2 Regression line = straight line through the point cloud Simplified example: data on stock price Y i and trade volume X i : X i Y i 1 2 4 2 1 3 Q: How to draw the line through the point cloud? A: we use the least squares principle Robert de Jong Econ 444, Monday September 25, class 2

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Econ 444, Monday September 25, class 2 (picture on blackboard; discussion) Line y = 2 point # vertical distance squared vertical to line distance 1 0 = | Y 1 2 | 0 2 = 0 2 0 = | Y 2 2 | 0 2 = 0 3 1 = | Y 3 2 | 1 2 = 1 total: 1 Robert de Jong Econ 444, Monday September 25, class 2
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class2-06 - Econ 444 Monday September 25 class 2 Econ 444...

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