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I am having trouble with part b.

Please explain. (2) Let Y be a linear function of X, ie. Y lo +biX where bo and bi are fixed real numbers. We want to minimize the discrepancy of Y from Y, i.e. minimizing the quantity (a) Find the valucs of bo and bi that minimizes Q (b) Use (a) to show that the minimal value of Q is 2 Cov2(x,y) Hint: You may use the fact that Q(bg, bị) E [(Y-Y*)2-Var (Y-Y*) + IE(Y-Y*)]2 where Y* = bi + biX and bō, bị are the values you get from (a).

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Answer #1

Here, we are concerned about the (b) part only. So I am not deriving the (a) part. Rather we are just using the results from part (a). First we will consider the sample of realizations of both X and Y variable and use them to get the b0 and b1. Then will prove the required by using the Hint.

band en with pana s ae denoted as 1:e, the...-st nomnak egn. EA mean-vale The above nwulbe can be evak ated SD, we ane nok elara Rmt a). above Va

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