19 Orthogonality vs unbiasedeness

This video clarifies the crucial distinction between orthogonality and unbiasedness in econometrics. Lady Ann explains why students often confuse these two concepts, particularly regarding the relationship between regressors and error terms versus residuals. The video details how Ordinary Least Squares (OLS) mechanically ensures regressors are orthogonal to residuals, a property that always holds. It then contrasts this with the concept of unbiasedness, which requires specific assumptions about the data generating process and cannot be guaranteed by OLS alone. Understanding this difference is vital for correctly interpreting OLS results and trusting your econometric models. Subscribe to @AxiomTutoringCourses for more econometrics tutorials.