3The Least Squares Estimation Method
In the four examples presented in Chapter 2, we had a scatter plot of points, each point representing an observation for a dependent variable (Y) and an independent variable (X). We added a line to the scatter plot that, in some sense, best fit the data and that demonstrated the general relationship between the two variables. But how do we identify such a line that best fits the data? We could consider simply using a ruler and drawing a line that seems to fit the data best. This method, however, is not advisable because it is not a precise approach, and in some cases, the scatter of points does not suggest to the naked eye an obvious location for the line. A more systematic, ...
Get Regression Basics, 3rd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
