September 2015
Beginner to intermediate
608 pages
13h 43m
English
Now that we've covered the basics of matrix and vector manipulation we're in a position to study the normal equation. This is an equation that uses matrix algebra to calculate the coefficients of our OLS linear regression model:
We read "to find β, multiply the inverse of X transpose X, by X transpose y" where X is the matrix of independent variables (including the intercept term) for our sample and y is a vector containing the dependent variables for our sample. The result β contains the calculated coefficients. This normal equation is relatively easy to derive from the equation of multiple regression, applying the rules of matrix ...
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