Variance, Covariance Matrix, Linear Regression, Standard Error, Confidence Interval.
a covariance matrix. In the above equation for variance, let’s replace β_cap with (β + Aϵ) and simplify the resulting expression as follows: (Image by Author) Let’s inspect the last line. The center term E(ϵϵ’)|X] deserves some explanation. E(ϵϵ’)|X] is the conditional expectation of ϵϵ’ given X.