In case of a multiple linear regression set up \(\underline{Y} = r\underline{B} + \underline{\varepsilon}\) with covariance matrix of \(\underline{\varepsilon}\) being \(\sigma^{2} t_{n}\), \(\sigma^{2} \gt 0\), which of the following statements is true ?
MH SET - 2023, SET Exam - 2023,
Answer: C
The correct statement is that the mean error ss is unbiased for \(\sigma^{2}\), while the mean regression ss and mean total ss are biased.
The paper prints the model as \(\underline{Y} = r\underline{B} + \underline{\varepsilon}\) with covariance \(\sigma^{2} t_{n}\); this is the usual linear model \(Y = X\beta + \varepsilon\) with \(\text{cov}(\varepsilon) = \sigma^{2}I_{n}\). In that model
\[ \begin{aligned} E(\text{MSE}) &= \sigma^{2} \\ E(\text{MSR}) &= \sigma^{2} + \frac{\beta' X' (I - J/n) X \beta}{p - 1} \end{aligned} \]
The residual mean square is always unbiased. The regression mean square exceeds \(\sigma^{2}\) by a non-negative term that is zero only when all slope coefficients are zero, which is why their ratio tests that hypothesis. The total mean square mixes the two and is biased for the same reason. So 'all three unbiased', 'regression and error unbiased' and 'all three biased' are wrong.
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