Question: Refer to Exercise. First regress Yon X3 and obtain the residuals from this regression, say eli. Then regress X2 on and obtain the residuals from this regression, say e2i. Now regress eli on e2i. This regression will give the partial regression coefficient. What does this exercise show? And how would you describe the residuals eli and
Exercise: Consider the sets of data given in the following two tables:
The only difference between the two tables is that the third and fourth values of X3 are interchanged.
(a) Regress Yon X2 and X3 in both tables, obtaining the usual OLS output.
(b) What difference do you observe in the two regressions? And what accounts for this difference?