Goodness-of-Fit We can think of each observatio n as being made up of an explained part, and an unexplained d part, y,=y,+u We then define the following >O-y is the total sum of squares(SST) >O-v is the explained sum of squares(SSE) >u? is the residual sum of squares(SSR) Then sst=sse+ ssr Economics 20- Prof anderson 7Economics 20 - Prof. Anderson 7 Goodness-of-Fit ( ) ( ) Then SST SSE SSR ˆ is the residual sum of squares (SSR) ˆ is the explained sum of squares (SSE) is the total sum of squares (SST) ˆ ˆ We then define the following : up of an explained part, and an unexplaine d part, We can think of each observatio n as being made 2 2 2 = + − − = +    i i i i i i u y y y y y y u