Variance, Covariance Matrix, Linear Regression, Standard Error, Confidence Interval.
E(ϵϵ’)|X] with σ²I in equation (10) to get the following equation for the variance of the least squares estimator: (Image by Author) To simplify the above equation, we’ll simplify the gray bit on the R.H.S. using the identity (AB)’ = B’A’. We’ll use the identities A^(-1)A = I, and IA = AI = A, and