Problem on linear regression model


Simulate N = 103 outcomes from the model

Y = -2 + X + ε

where X ~ U[0, 1] and ε ~ N(0, 0.12) independently. From your simulated outcomes of (X, Y ), βt a linear regression model to increasing numbers of outcomes (from N = 2 to N = 104) as y = β0 + β1x, by using the solution to the normal equations to obtain estimates for ^β = ( ^β0, ^β1)T , via solving

(ATA)β^ = ATy

where y = (y1 , . . . , yN)T , and

1028_standard normal density curve2.png

Plot your estimates for β0 and β1 as N increases, together with a line indicating their true values. Supply your code.

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Mathematics: Problem on linear regression model
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