INTRODUCTION TO STATISTICS AND ECONOMETRICS

GENERALIZED LEAST SQUARES

In this section we consider the regression model (13.1.1) у = X0 + u,

where we assume that X is a full-rank T X К matrix of known constants and u is a Г-dimensional vector of random variables such that £u = 0 and

(13.1.2) £uu' = X.

We assume only that X is a positive definite matrix. This model differs from the classical regression model only in its general specification of the variance-covariance matrix given in (13.1.2).