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(Requires Calculus)For the Simple Linear Regression Model of Chapter 4 Yi=β0+β1Xi+uiY _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i }

Question 52

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(Requires Calculus)For the simple linear regression model of Chapter 4, Yi=β0+β1Xi+uiY _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i } , the OLS estimator for the intercept was β^0=Yˉβ^1Xˉ\hat { \beta } _ { 0 } = \bar { Y } - \hat { \beta } _ { 1 } \bar { X } , and β^1=i=1nXiYinXYi=1nXi2nXˉ2\hat { \beta } _ { 1 } = \frac { \sum _ { i = 1 } ^ { n } X _ { i } Y _ { i } - n \overline { X Y } } { \sum _ { i = 1 } ^ { n } X _ { i } ^ { 2 } - n \bar { X } ^ { 2 } } Intuitively, the OLS estimators for the regression model Yi=β0+β1X1i+β2X2i+uiY _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { 1 i } + \beta _ { 2 } X _ { 2 i } + u _ { i } might be β^0=Yˉβ^1Xˉ1β^2Xˉ2,β^1=i=1nXˉ1iYinXˉ1Yˉi=1nXˉ1i2nXˉ12\hat { \beta } _ { 0 } = \bar { Y } - \hat { \beta } _ { 1 } \bar { X } _ { 1 } - \hat { \beta } _ { 2 } \bar { X } _ { 2 } , \hat { \beta } _ { 1 } = \frac { \sum _ { i = 1 } ^ { n } \bar { X } _ { 1i } Y _ { i } - n \bar { X } _ { 1 } \bar { Y } } { \sum _ { i = 1 } ^ { n } \bar { X } _ { 1 i } ^ { 2 } - n \bar { X } _ { 1 } ^ { 2 } } and β^2=i=1nXˉ2iYinXˉ2Yˉi=1nXˉ2i2nXˉ22\hat { \beta } _ { 2 } = \frac { \sum _ { i = 1 } ^ { n } \bar { X } _ { 2 i } Y _ { i } - n \bar { X } _ { 2 } \bar { Y } } { \sum _ { i = 1 } ^ { n } \bar { X } _ { 2 i } ^ { 2 } - n \bar { X } _ { 2 } ^ { 2 } } By minimizing the prediction mistakes of the regression model with two explanatory variables, show that this cannot be the case.

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