Answer to Question #208811 in Macroeconomics for Juhi

Question

y = Xß + u where y is nx1, x is nxk, and u is nx1 such that ulx-N(0,0²). Write y = 9+, where 9 = Xß is the least squares predicted value.

a. Show that (B-B) = Au and a = Mu, what is your A and M?

b. Show that y = the mean of the predicted values c. Show that X'û = 0,9'a = 0

d. Derive R² for the model where the first column of X has a constant.

Answer 1

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