National open university of nigeria introduction to econometrics II eco 356
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Introduction to Econometrics ECO 356 Course Guide and Course Material
Introduction to Econometrics ECO 356 Course Guide and Course Material
2.1.3.3
Least Squares Regression
Suppose that you are given the four observations on
X
and
Y
represented in Figure 2.1 and you are asked to obtain
estimates of the values of
and
, in [2.01]. As a rough approximation, you could
do this by plotting the four
P
points and drawing a line to fit them as best you can, as shown in Figure 2.2 The intersection
of the line with the
Y
- axis provides an estimate of the intercept
,
which will be denoted
b
1
and the slope provides an estimate of the slope coefficient
, which will be denoted
b
2
. The fitted
line will be written as
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