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The parameters ^1 and ^2 are the OLS intercept and slope coefficients from a regression of Ci on Mi and the sample average of the
The parameters ^1 and ^2 are the OLS intercept and slope coefficients from a regression of Ci on Mi and the sample average of the stochastic error term. a. Show that ^2 can be written as ^2=2+i=1nfii, where fi=mi/TSSM and mi=MiM and TSSM= total sum of squares of Mi. [5 Marks] b. Using part (a) and i=1nfi=0, show that ^2 and are uncorrelated. [6 Marks] c. Derive an expression that shows ^1 can be written as ^1=1+(^22)M. [3 Marks] The parameters ^1 and ^2 are the OLS intercept and slope coefficients from a regression of Ci on Mi and the sample average of the stochastic error term. a. Show that ^2 can be written as ^2=2+i=1nfii, where fi=mi/TSSM and mi=MiM and TSSM= total sum of squares of Mi. [5 Marks] b. Using part (a) and i=1nfi=0, show that ^2 and are uncorrelated. [6 Marks] c. Derive an expression that shows ^1 can be written as ^1=1+(^22)M. [3 Marks]
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