Thus, all relevant explanatory variables should be included in the regression model, asotherwise the OLS estimators of the parameters of interest may be biased, and will then stayaway from the true values even if the sample size ngrows to infinity. 2.The multiple regression model, and least squares estimationThe multiple regression model with an intercept takes the formYj'β1X1,j%β2X2,j%...%βk&1Xk&1,j%βk%Uj,j'1,2,...,n,(7)where are the explanatory variables, is the error term, and is theXi,j,i'1,2,...,k&1,Ujβkintercept. We can write this model more compactly asYj''ki'1βiXi,j%Uj,j'1,2,...,n,(8)where Xk,j/1.
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