Consider the linear regression model given by y=xb+ &, where E(') = 01. a) Explain the...

 

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Consider the linear regression model given by y=xb+ &, where E(') = 01. a) Explain the assumptions of the linear regression model. [5 marks] b) Derive the ordinary least squares (OLS) estimate of b. Explain the steps involved in the derivation. [10 marks] Show that the OLS estimate of bis unbiased. [5 marks] Consider the following data set with three time-series observations: 1.53 1 1.84 HB) 1.5 1 0.1 c) d) y = 0.25,x= 1 (1) 0.75 Use the OLS formula derived in part (b) to estimate the coefficient busing the data on the dependent variable y and independent variable x in equation (1). Show all calculations. [20 marks] Consider the linear regression model given by y=xb+ &, where E(') = 01. a) Explain the assumptions of the linear regression model. [5 marks] b) Derive the ordinary least squares (OLS) estimate of b. Explain the steps involved in the derivation. [10 marks] Show that the OLS estimate of bis unbiased. [5 marks] Consider the following data set with three time-series observations: 1.53 1 1.84 HB) 1.5 1 0.1 c) d) y = 0.25,x= 1 (1) 0.75 Use the OLS formula derived in part (b) to estimate the coefficient busing the data on the dependent variable y and independent variable x in equation (1). Show all calculations. [20 marks]

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a Assumptions of the linear regression model 1 Linearity The relationship between the dependent variable y and the independent variables x is linear This means that changes in y are directly proportio... View the full answer