Introduction to OLS

This lecture introduces the Linear Regression Model and Ordinary Least Squares (OLS) as the basic tool of econometrics, emphasizing its versatility and potential risks when misused. It covers the linear relationship between dependent and independent variables, different variable types, and the algebraic tools for determining coefficients. The lecture explains the graphical illustration with a single regressor, manual calculation of regression coefficients, goodness-of-fit measures like R-squared, and the interpretation of regression results. It concludes with a practical example using Stata to calculate regression coefficients and validate results, providing a comprehensive overview of OLS fundamentals.