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Principles of Econometrics 5th Edition by R. Carter Hill Solution manual

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           We observe that . That is, the predicted value at the sample mean  is the sample mean of the dependent variable . This implies that the least-squares estimated line passes through the point . This point is at the intersection of the two dashed lines plotted on the graph in part (b) .
 
 (d)    The values of the least squares residuals, computed from , are:
          

161.71429
24−2.57143
3112.14286
49−2.14286
513−0.42857
6171.28571
 
(e)      Their sum is  and their sum of squares is
 
(f)
                                                   
                           

Exercise 2.4
(a)      If  the simple linear regression model becomes
                                
          
(b)      Graphically, setting  implies the mean of the simple linear regression model  passes through the origin (0, 0).
 
(c)      To save on subscript notation we set   The sum of squares function becomes
                       

Figure xr2.4(a) Sum of squares for
 
           The minimum of this function is approximately 25 and occurs at approximately  The significance of this value is that it is the least-squares estimate.
(d)      To find the value of b that minimizes  we obtain
                                
           Setting this derivative equal to zero, we have
                                     or    
 

Exercise 2.4 (Continued)
           Thus, the least-squares estimate is
                                
           which agrees with the approximate value of 2.7 that we obtained geometrically.
 
(e)     
                            
Figure xr2.4(b) Observations and fitted line
 
           The fitted regression line is plotted in Figure xr2.4 (b). Note that the point  does not lie on the fitted line in this instance.
 
(f)       The least squares residuals, obtained from  are:
                                               
                                             
           Their sum is   Note this value is not equal to zero as it was for
 
(g)     
                                

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