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6034 - Classical Linear Regression Model
6034 - Classical Linear Regression Model
i
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9
10
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12
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20
52.25
58.32
81.79
119.90
125.80
100.46
121.51
100.08
127.75
104.94
107.48
98.48
181.21
122.23
129.57
92.84
117.92
82.13
182.28
139.13
2246.0
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258.30
343.10
425.00
467.50
482.90
487.70
496.50
519.40
543.30
548.70
564.60
588.30
591.30
607.30
611.20
631.00
659.60
664.00
704.20
704.80
10898.70
-60.0535
-53.9835
-30.5135
7.5965
13.4965
-11.8435
9.2065
-12.2235
15.4465
-7.3635
-4.8235
-13.8235
68.9065
9.9265
17.2665
-19.4635
5.6165
-30.1735
69.9765
26.8265
-286.635
-201.835
-119.935
-77.435
-62.035
-57.235
-48.435
-25.535
-1.635
3.765
19.665
43.365
46.365
62.365
66.265
86.065
114.665
119.065
159.265
159.865
17213.43
10895.76
3659.64
-588.23
-837.26
677.86
-445.92
312.13
-25.26
-27.72
-94.85
-599.46
3194.85
619.07
1144.16
-1675.13
644.02
-3592.61
11144.81
4288.62
45907.91
82159.62
40737.37
14384.40
5996.18
3848.34
3275.85
2345.95
652.04
2.67
14.18
386.71
1880.52
2149.71
3889.39
4391.05
7407.18
13148.06
14176.47
25365.34
25556.82
251767.8
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Properties of SRF
1. It passes through
2. The mean value of estimated Y is equal to the mean value
of the actual Y
3. The mean value of the residuals is zero
4. The residuals are uncorrelated with the predicted
5. The residuals are uncorrelated with the
heteroscedasticity
Important feature of
The variance of is directly proportional to but inversely proportional to
-> Given , the larger variation in X values, the smaller the variance of implying
greater precision
-> Given , the larger , the larger the variance of
-> As sample size n increases, the number of terms in , the smaller the variance
of
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Coefficient of determination
In deviation
form
Coefficient of determination (
1?
Alternatively:
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Coefficient of correlation
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Properties of r:
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Theoretical justification
Central limit theorem (CLT): Given random and independent samples of N
observations each, the distribution of sample means approaches normality
as the size of N increases, regardless of the shape of the population
distribution
represent combined influence (on the dependent variable) of a large
number of independent variables that are not explicitly introduced in the
regression model. By CLT, if there is a large number of independent and
identically distributed random variables, the distribution of their sum
follows normal distribution as the number of variables increases indefinitely.
A variant of CLT, even if the number of variables is not very large or if these
variables are not strictly independent, their sum, may still be normally
distributed.
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Interval Estimation
Example = 0.7240
Point estimator
-> constructing an interval around the point estimator
The probability that the random interval contains the true is
)
Confidence interval
Confidence coefficient
level of significance
Endpoints of CI
confidence limits (lower / upper)
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Interpretation:
Given the confidence coefficient of 95 percent, in 95 out of 100
cases, the interval of
will contain the true .
However, the probability that the specified fixed interval includes the
true is 1 or 0.
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