Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2012/iii/paper-37/1/b/solution

The regression residual vector is , where is the hat matrix. Both and are symmetric idempotent matrices, and . Therefore and the linear image of a multivariate normal vector gives
This multivariate normal distribution is singular, with rank : fitted-residual orthogonality forces . Specifically, and for distinct observations. Thus regression residuals are generally neither independent nor identically distributed, even though the model errors are. Also and is independent of , which justifies the standard errors and exact Student t-tests below.

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