Question

2. Why do the following affect the precision of regression coefficient estimates o The variance of the disturbances . The sample size The sample variance of the independent variable.

Answer 1

Solution 2. Conclusion The variance of the disturbances does affect the precision of the regression coefficient estimates. If the variance of the disturbances is high, that is, the variance of the error is high then there are high chances that the estimates cannot be precisely estimated. Due to high error, the estimates may not be correctly and precisely estimated. As the variance of the disturbance is high, the precision of the regression coefficient estimate is less. Conclusion The sample size does affect the precision of the regression coefficient. With the increase in the sample size, the amount of information about the population increases, and thus, the regression estimate become more precise. Thus, with the increase in the sample size, the regression estimate becomes more precise. Conclusion The sample variance does affect the precision of the regression estimates. The sample variance is the unbiased estimate of the population variance. Thus, as the sample variance is less, the regression estimate is more precisely estimable.