Question

En el método de estimación por mínimos cuadrados ordinarios (MCO), se elige el vector de beta (ángulo), tal que:

a. se haga mínima la SR, o suma de los cuadrados de los residuos.

b. se haga máxima la ST del modelo

c. se garantice que la suma de los cuadrados de los residuos SR sea cero.

d. se calculo mediante la expresión: beta = (X'X)X'y

Answer 1

Answer to the following question:

Option a: The SR, or sum of the square of the residuals, is minimized.

Explanation: The OLS estimator β is obtained by minimising the sum of square of the residual. The model is written as:

Where, Y is the vector of the dependent variable, X is the vector of the independent variable. U is the residual term. By minimising the sum of square of the U vactor we get the estimate of β as:

Minimisation of the sum of resudual vator implies that Minimise Sum(UU'). where U' is the transpose of the U vactor. After minimisation, the β will be:

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