Solved – Intution behind variance of OLS slope and intercept estimators in simple linear regression being independent of $y_i$’s

least squaresregressionvariance

I noticed when calculating the variance of the slope and intercept estimators in simple linear regression that the final formulae do not contain any $y_i$'s. While I understand the calculation, I was wondering if there is a simple intuitive argument for this. I assume that the errors being i.i.d. with a fixed variance regardless of $x$ or $y$ is key, but I think there might be something a bit deeper here that I am missing. It just seems like there must be a calculation free, logical, explanation of this.

\begin{equation}
y_i = \theta_0 + \theta_1x_i + \epsilon_i,
\end{equation}

\begin{equation}
Var{[\hat{\theta_0}]}=\frac{\sigma^2\sum\limits_{i=1}^{n}x_i^2}{n\sum\limits_{i=1}^{n}x_i^2-\left(\sum\limits_{i=1}^{n}x_i\right)^2}
\end{equation}

\begin{equation}
Var{[\hat{\theta_1}]}=\frac{n\sigma^2}{n\sum\limits_{i=1}^{n}x_i^2-\left(\sum\limits_{i=1}^{n}x_i\right)^2}
\end{equation}

Best Answer

Well the $y_i$'s are present in a way in your $\sigma^2$: the larger the spread of the $y_i$'s around $\theta_0 + \theta_1 x_i$, the larger the variances of these estimators.

The clue is that these equations are only correct under the model assumption of constant variance $\sigma^2$. Once you set the $x_i$'s and assume constant variances, the $y_i$'s are known to be $Y_i \sim N(E(Y_i|x_i),\sigma^2)$ and thus no longer "affect" the theoretical variances of the estimators.