Multiple Regression
Multiple Regression
And Management
Rabecca Hatoongo-Masenke
Introduction to Econometrics
Date
Outline
Multiple Linear Regression Analysis
• Assumptions of classical linear regression model.
• Properties of least square estimators
• Interpretation of Multiple Regression Equation (Partial Coefficients)
Assumptions
• The assumptions are the same as under the two variable regression
• Students must give all 10 Assumptions.
Method of OLS
• Recall the two-variable PRF:
=
• the PRF is not directly observable. Thus we estimate the SRF
=
=+
• which shows that the (the residuals) are simply the differences
between the actual and estimated Y values
Method OLS Cont
• Now given n pairs of observations on Y and Xs, we would like to
determine the SRF in such a manner that it is as close as possible to the
actual Y. To this end, we may adopt the following criterion: Choose the
SRF in such away that the sum of the residuals
= ( − ) is as small as possible
• However summing alone does not give a true picture: