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Lab 5 Exercises - OLS Live and Excel Regression

# Lab 5 Exercises - OLS Live and Excel Regression - Lab 5 OLS...

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Lab 5: OLS Live and Regression Objectives: 1. Review OLS. What does OLS mean? What does it accomplish? What do we choose? 2. Create a spreadsheet including the data manipulations needed to estimate a regression line. 3. Given sample data, use Excel to estimate a regression line. Key Terms: 1. Correlation . 2. Regression, fitting a line, estimating 0 1 ˆ ˆ and β β . Data : Lab 5 – OLS Live and Regression.xls . Exercises: Regression Lines – OLS estimation. 1. Open the worksheet titled: OLS – Live ; either from the ResEc 312 folder or from the course website. You will observe a table with 5 columns including: values for Y (weekly expenditures in \$), corresponding values for X (weekly income - \$), “fitted values” ( ˆ i Y ), errors ( e i ), and errors squared ( e i 2 ). You will also observe a second table below the first and two graphs. The first graph, titled OLS: Finding the line of “best fit” shows a scatter diagram of the X,Y values. The second table has a few possible slope values in it. The values for the sum of the squared-errors are blank; you’ll need to generate those values. Once you fill out that table, the relationship between the sum of the squared-errors and choices for the slope will appear. Don’t add any graphs or charts to this page. Just use the existing templates . 2. To show how the sum of the squared-errors changes as you change the slope do the following: a) Enter a possible slope value for 1 ˆ β in cell B17. (I’ve already done the possible value of 0.90 and copied the sum of the squared-errors value to the first cell in the second table.) Try additional values between 0.9 and 0.3. When you enter the value 0.80 in cell B17, Excel calculates new values in Table 1. You’ll see changes in the fitted values, the errors and the squared-errors. Copy the new value that appears in cell F13 for the sum of the squared- errors . When pasting the values into the second table, you only want to paste the number, not the formula. To do this, always use Paste Special and Values .

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Lab 5 Exercises - OLS Live and Excel Regression - Lab 5 OLS...

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