Lec 05 REGRESSION THROUGH ORIGIN

This document explains Regression Through the Origin, a special case of regression where the intercept term is omitted and the regression line passes through the origin. It begins with an introduction and provides economic examples where a zero-intercept model is theoretically justified. The estimation procedure is discussed, highlighting how coefficients are derived without an intercept. A clear comparison between models with and without intercept is presented to show their differences in interpretation and application. The document also examines the consequences of imposing a zero intercept, including potential bias if the assumption is incorrect. An illustrative numerical example is included for better understanding. Additionally, the concept of the coefficient of determination (R²) in origin-based models is explained. This resource helps students understand when and how to appropriately apply regression through the origin.