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Econometrics

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The Meaning of Best Fit Line

EMETRC-I36UOE

People often say that the OLS method finds the line that is the "best fit" for the data. What do they mean by that?

A

The estimates of the coefficients are chosen so that the sum of the squared residuals equals zero.

B

The estimates of the coefficients are chosen so that the resulting line intersects each of the data points

C

The estimates of the coefficients are chosen to minimize the sum of the squared residuals

D

The estimates of the coefficients are chosen so that the sum of the error terms equals zero