LSE的Dougherty计量经济学教材英文版chapter2.Image.Marked.pdfVIP

2 SIMPLE REGRESSION ANALYSIS This chapter shows how a hypothetical linear relationship between two variables can be quantified using appropriate data. The principle of least squares regression analysis is explained, and expressions for the coefficients are derived. Most students taking an introductory course will already have taken a basic calculus course and should have no trouble following the derivations of the regression coefficients. Those who have not should skip Section 2.3 and the proof in Section 2.5. They will then have to take the expressions on trust, but they should still be able to understand in general terms how the expressions have been derived. 2.1 The Simple Linear Model The correlation coefficient may indicate that two variables are associated with one another, but it does not give any idea of the kind of relationship involved. We will now take the investigation a step further in those cases for which we are willing to hypothesize than one variable depends on another. It must be stated immediately that one would not expect to find an exact relationship between any two economic variables, unless it is true as a matter of definition. In textbook expositions of economic theory, the usual way of dealing with this awkward fact is to write down the relationship as if it were exact and to warn the reader that it is really only an approximation. In statistical analysis, however, one generally acknowledges the fact that the relationship is not exact by explicitly including in it a random factor known as the disturbance term. We shall start with the simplest possible model: y = α + βx