Paper 1, Section I, 7H\mathbf{7 H} \quad

Statistics
Part IB, 2009

What does it mean to say that an estimator θ^\hat{\theta} of a parameter θ\theta is unbiased?

An nn-vector YY of observations is believed to be explained by the model

Y=Xβ+εY=X \beta+\varepsilon

where XX is a known n×pn \times p matrix, β\beta is an unknown pp-vector of parameters, p<np<n, and ε\varepsilon is an nn-vector of independent N(0,σ2)N\left(0, \sigma^{2}\right) random variables. Find the maximum-likelihood estimator β^\hat{\beta} of β\beta, and show that it is unbiased.