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Consider you estimate the following regression model, y = α + βx + u
where y is the dependent variable, x is the independent variable and u is the error term.
(a) Explain the difference between correlation and regression and explain the assumptions of the regression model.
(b) What are the interpretation of α and β?
(c) How would you estimate the unknown population parameters?
(d) What are the statistical properties of the method you proposed?
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