7 - Chapter 2 Exercise Solutions Principles of Econometrics...

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Chapter 2, Exercise Solutions, Principles of Econometrics, 3e 7 EXERCISE 2.4 (a) If 1 0, β= the simple linear regression model becomes 2 ii i y xe + (b) Graphically, setting 1 0 implies the mean of the simple linear regression model 2 () E yx passes through the origin (0, 0). (c) To save on subscript notation we set 2 . β =β The sum of squares function becomes 22 2 2 2 2 2 11 ( ) ( 2 ) 2 352 2 176 91 352 352 91 NN i i i i i i i i S y x y xy x y x == −β = = =− × β + β =−β + β ∑∑ 10 15 20 25 30 35 40 1.6 1.8 2.0 2.2 2.4 BETA SUM_SQ Figure xr2.4(a) Sum of squares for 2 β The minimum of this function is approximately 12 and occurs at approximately
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This note was uploaded on 11/23/2011 for the course ECON MPBE taught by Professor Jansveceny during the Spring '11 term at Metropolitní Univerzita Praha.

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