Using the data set macro, find the least squares estimate of the following two models:
Model A: Inves = ßˆ0 +ßˆ1Interest
Inves = ßˆ0 +ßˆ1Interest +ßˆ3GNP
a) What does "least squares estimates" mean? What is being estimated? What is being squared? In what sense are the squares "least"?
b) Give an interpretation of 1 ˆß in each equation.
c) Interpret the values of R2 in each equation. Is it possible for R2 to be negative?
d) Interpret the values of R 2in each equation. Is it possible for R 2to be negative?
e) Which model has estimated signs that correspond to your prior expectations? How do you explain the sign reversal on the coefficient of 1 ˆß ?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.