45 A little algebra

In this video, we clarify a common point of confusion in econometrics regarding variations of sum of squares. We explain why the sum of x_i squared is not always equal to the sum of (x_i - x_bar) squared. This distinction is crucial because OLS regression inherently works with deviations from the mean, not just raw sums. We'll show the mathematical link between these two expressions and explain why using the sum of x_i squared implicitly forces the regression through the origin, leading to biased estimators. Understanding this difference is key to correctly applying OLS with an intercept. Subscribe to @AxiomTutoringCourses for more econometrics tutorials.