The Classical Linear Regression Model

It is a challenge to give students a solid conceptual understanding of the classical linear regression model (CLRM). This material is placed later in the text because it helps to have a familiarity with regression analysis before tackling the classical linear regression model (CLRM). The approach is to explain unbiasedness and efficiency with Monte Carlo experiments. For an unbiased estimator, repeated sampling shows that the average of the estimators equals the true value. The proof is alluded to and shown in the appendix to this chapter. This is critical because the proofs of unbiasedness and efficiency cannot be completed without recourse to the assumptions of the CLRM. The assumptions are presented in plain English and in mathematical notation. In this manner, the student is given a conceptual basis for understanding the CLRM.