Question

Consider the model = + ε , where a and b are constants

and ε is the error term. Explain how you would estimate parameters
a and b.

Answer 1

To estimate the parameters a and b in the model ŷ = a + bx, we use a method called least squares regression.

Step-by-step explanation:

To estimate the parameters a and b in the model ŷ = a + bx, we use a method called least squares regression. This method involves minimizing the sum of squared errors (SSE) between the observed data points and the predicted values on the regression line. By finding the values of a and b that make SSE a minimum, we can determine the best fit line for the data.