ECON206_1011_01_Handout_09

ECON206_1011_01_Hand - ECON 206 METU Department of Economics LECTURE 09 SIMPLE REGRESSION MODEL I Outline of todays lecture I Simple Linear

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 206 December 20, 2010 METU- Department of Economics Instructor: H. Ozan ERUYGUR e-mail: [email protected] 1 LECTURE 09 SIMPLE REGRESSION MODEL - I Outline of today’s lecture: I. Simple Linear Regression Model . ...................................................................................... 1 II. Linearity Issue . .................................................................................................................. 2 III. Stochastic Nature of Linear Regression Model . .............................................................. 3 IV. Assumptions of Classical Linear Model . ......................................................................... 4 V. Gauss Markov Theorem . ................................................................................................... 8 VI. Normality Assumption. .................................................................................................... 8 I. Simple Linear Regression Model In econometrics we deal exclusively with stochastic relations. o Stochastic is a term for random or uncertain . o It is the opposite of deterministic . The simplest form of stochastic relation between two variables X and Y is called a simple linear regression model. o 01 tt t YX u β =+ + t =1,. .., n where Y is dependent variable X is independent (explanatory) variable 1 u is the stochastic disturbance term, or error term. 0 and 1 are the regression parameters which are unknown . Subscript t refers to the t th observation. 1 The terms regressor, regressand and covariate are also used.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ECON 206 December 20, 2010 METU- Department of Economics Instructor: H. Ozan ERUYGUR e-mail: [email protected] 2 The values of the variables X and Y are observable. However, the values of u are not observable. Observations on X and Y can be made over time, in which case we speak of having “ time series ” data. o For example we may have data on Turkey’s GDP over 30 years (data collected over a period of time). Or they can be made over individuals, or groups of individuals, firms, or group of firms, countries, or group of countries, objects, geographical areas, etc., in which we speak of having “ cross section data ”. o For example we may have data on several countries’ GDP for one year (data collected at one point in time). Hence, the subscript t may refer to the t th year (quarter, month, day, etc) or to the t th individual or group (such as countries; Turkey, Germany, France, USA, Japan, etc. .).
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/22/2012 for the course ECON 106 taught by Professor Kücüksenel during the Spring '12 term at Middle East Technical University.

Page1 / 8

ECON206_1011_01_Hand - ECON 206 METU Department of Economics LECTURE 09 SIMPLE REGRESSION MODEL I Outline of todays lecture I Simple Linear

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online