Chapter 4: Computing the OLS Regression Line
Chapters 4 and 5 introduce the concept of regression, the fundamental analytical tool of econometrics. The regression line summarizes the relationship between two variables. Chapter 4 covers the mechanics of regression. We discuss the theory behind fitting a line, present an algebraic exposition of the ordinary least squares (OLS) regression coefficients, and show several ways to have Excel report regression results.We note that OLS is not the only way to fit a regression line. Chapter 5 focuses on interpreting what OLS regression does and the results it produces. Of course, these two chapters are only an introduction to regression analysis. The remainder of this book is dedicated to ever more powerful and sophisticated applications of the method of regression.