Regression Algebra and a Fit Measure参考.pptVIP

* * * * * * * * * * * * * * * * * * * * * * * * Applied Econometrics William Greene Department of Economics Stern School of Business Applied Econometrics 5. Regression Algebra and a Fit Measure The Sum of Squared Residuals b minimizes e?e = (y - Xb)?(y - Xb). Algebraic equivalences, at the solution b = (X?X)-1X?y e’e = y?e (why? e’ = y’ – b’X’) e?e = y?y - y’Xb = y?y - b?X?y = e?y as e?X = 0 (This is the F.O.C. for least squares.) Minimizing e’e Any other coefficient vector has a larger sum of squares.