Error Term as the dependent variable- Regression

We assume the following equation that considers the Error Term as the dependent variable and therefore estimated through residual estimation: E = 𝛿0 +𝛿1. K + v

a. Based on OLS simple form, provide a simplified formula to estimate the effect of K on the residual term.

b. If K= (k-k bar)/ Sigma, re-derive after simplification the parameters of the model

Sample Solution