【Econometrics】The Fitted Line : Basic Idea
The Fitted Line Basic Idea In practice, we only see the observations plotted in Fig 5. In order to derive the shape of the line that might have generated these points, we can use $P_1$-$P_4$ points to draw a line which is an approximation to the $Y = \beta_1+\beta_{2}X + u$. We write this line as $\hat{Y} = b_1+b_{2}X$, where the hat ("^") represents the fitted variable, lower case $b$'s represe..
