My role: Build a model, I am a researcher

Business problem: explain reasons for losses of IOCL

Generalization: relevancy of the model moving from 2018 to 2025

Epsilon is randomness- we cannot model it

Fitted and the true model

Loss is plotted in the slide

U cannot be explained or given an estimate value. Part of it lies in e

How does the m/c arrive at estimated equation?

- Draw the line

- Estimation technique: OLS

To have a good fitted model, for R to be P, R-P=e has to be minimum, so b1 abd b2 in fitted model is
obtained by minimizing sum of e-square (why e-square and not e?)

What is Q?

Diff betn OLS and Arch

OLS minimizes e!

How do we know whether OLS is used or not?

Dependent Variable: Satisfaction

I as a researcher propose the Beta model and not the b model (based on my educated guess work)

See the estimates in SPSS (the Bsss)

Default technique is OLS

How much is the variation in losses around the mean is the losses due to cost of refining around its
mean: R2

Unexplained variation is e which is not included in the formula of R2