What is OLS Method for Estimation and BLUE in Regression Model.?

(Syeda Sadia Amber Jilani, Faisalabad, Punjab, Pakistan)

The OLS Method for Estimation & BLUE in Econometrics

Ordinary Least Square (OLS) Is a statistical technique which helps us to gain the values of parameters in a regression model to check the dependency between the variables.

According to the Gauss-Markov Theorem, the OLS estimators βo and Bi are the Best Linear Unbiased Estimators(Blue) of βo and βi in the linear regression model.

The characteristics or Properties Of OLS Estimators are very important which are called BLUE. Infact we can say that OLS Estimators are BLUE. I.e They are,
B----> Best
L---->Linear
U--->unbiased
E----> Estimation.
It means that the values of parameters in a regression model Which are gained by OLS Method are Best Linear Unbiased Estimation.
In the other words, the OLS estimators βo and Bi have the minimum variance of all linear and unbiased estimators of βo and Bi. In simple words the value of error term is Very low, so there is no chance for any doubt about the OLS Estimators.

Notes of Economics & Econometrics by
*Syeda Sadia Amber Jilani*
Economist & Economic Analyst.

Syeda Sadia Amber Jilani
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