Question 3 [4+6=10 points]: In the standard linear model Y = X/ + e with X fixed the vector of residuals e can be expressed compactly as e = (I - H)y. where H = X (X'X] X' is the hat matrix. The covariance matrix of the residuals is therefore equal to (I - H)E(I - HY, where E is the covariance matrix of the error vector e. Assume that the errors are independent and identically distributed with error o'. 3.2 Show that the covariance matrix of the residuals reduces to (1 - H)o