Solution

ID: past-exam-of-the-probability-statistics-and-options-i-course-of-the-university-of-oxford/2010/o/2/a/solution

The full column rank makes invertible. The least-squares normal equations from minimizing squared residuals give
The errors have covariance matrix by independence and equal variance. Applying the covariance transformation rule to this linear estimator yields
The parameter estimator is unbiased because .

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