# tutorial3 - ReviewQuestions( (xi,yi,i=1,nwiththe...

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Week 3 Tutorial Exercises Review Questions (these may or may not be discussed in tutorial classes) The minimum requirement for OLS to be carried out for the data set {( x i , y i ), i=1,…, n } with the sample size n > 2 is that the sample variance of x is positive. In what circumstances is the sample variance of x zero? When all observations on x have the same value, there is no variation in x . The OLS estimation of the simple regression model has the following properties: a) the sum of the residuals is zero; b) the sample covariance of the residuals and x is zero. Why? How would you relate them to the “least squares” principle? These are derived from the first order conditions for minimising the sum of squared residuals (SSR). Convince yourself that the point ) , ( y x , the sample means of x and y , is on the sample regression function (SRF), which is a straight line. This can be derived from the first of the first order conditions for minimising SSR. How do you know that SST = SSE + SSR is true? The dependent variable values can be expressed as the fitted value plus the residual. After taking the average away from both side of the equation, we find ሺݕ െݕ തሻ ൌ ሺݕ െݕ തሻ൅ݑ . The required “SST = SSE + SSR” is obtained by squaring and summing both sides of the above equation, noting ሺݕ െݕ തሻൌߚ ሺݔ െݔҧሻ , and using the second of the first order conditions of minimising SSR. Which of the following models is (are) nonlinear model(s)?

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## This note was uploaded on 02/29/2012 for the course ECON 2206 taught by Professor Yang during the One '11 term at University of New South Wales.

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tutorial3 - ReviewQuestions( (xi,yi,i=1,nwiththe...

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