7A.3 DERIVATION OF EQUATION (7.4.19)
Recall that m = Yi — ft — ¡32 X2i — fa X3i which can also be written as ui = yi — fa X2i — fa X3i where small letters, as usual, indicate deviations from mean values. Now
= E uiy where use is made of the fact that E uix2i = E uix3i = 0. (Why?) Also that is,
E uiyi = E y^ = E yi (^ — X2i — ¡33 X3i) E"2 = £ yi2 — & £ yix2i— & E yix3i which is the required result.
246 PART ONE: SINGLE-EQUATION REGRESSION MODELS
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