BACKGROUND:

I have simple regression line.

yi = α+βixi,t + εi,t - equation (I)

where i = 1 ....5

I run the regression and get its estimated results of y. So far so good.

Now comes the second regression equation.

Excess Y = ACTUAL y – (estimated y + 1. 5σi ) – Equation (II)

QUESTION:

Q: How will I calculate 1. 5σi in equation II. As what i understand that it has something to do with the results of equation (I) as well.

Please guide.

I shall be thankful to you

S.Franck