Anon

Model Estimation 269

table 13.1 Sample Data for Illustration

Observation Y X

1 0.8 0.7

2 1.8 1.3

3 1.1 2.9

4 1.7 4.2

5 1.6 5.5

6 1.4 6.7

7 1.6 7.4

8 1.7 8.1

9 2.1 9.2

10 2.4 10.6

0 2 4 6 8 10 12

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

x

y

FigUre 13.1 Scatterplot of the 10 Sample Data in Table 13.1

represents the sample data in Table 13.1 and a straight line corresponding
to a = 0.05, b = 0.1.
It is evident that this straight line is not the closest possible to the
sample points because it remains entirely on one side of the points. To
find the optimal line we have to find a and b that minimize the sum of
the squared distances between the sample points and the corresponding