Econometrics HT 18
Chapter 5 : Deriving the OLS formula
By Lund University
Here we derive the OLS formula by minimizing the sum of squared residuals.
Deriving the OLS formula
This section presents the least squares principle mathematically as a minimization problem in two variables (intercept and slope). We will solve this problem analytically, which will result in the OLS formula. Based on the first order condition from the optimization problem, we can derive several important OLS results.