E(epsilon i | x i) = 0 says that the sample regression function residuals are un
ID: 3201578 • Letter: E
Question
E(epsilon i | x i) = 0 says that the sample regression function residuals are unrelated to the explanatory variable. the conditional distribution of the error given the explanatory variable has a zero mean. the sample mean of the x's is much larger than the sample mean of the errors. dividing the error by the explanatory variable results in a zero (on average). If you had a regression model with two regressors (or explanatory variables), then omitting one variable which is relevant: will have no effect on the coefficient of the included variable if the correlation between the excluded and the included variable is negative. can result in a negative value for the coefficient of the included variable, if the ommitted variable with the included variable, even though the coefficient will have a significant positive effect on y if the omitted variable were included. will always produce a negatively or positively bias estimate for the included variable makes the sum of the product between the included variable and the residuals different from 0. chose one of the word to fill in the blank: E(y) Y-hat Y Y-bar Error variable Residual In multiple regression model, we have the following 6 assumptions: Assumption 1: Linear in Parameters Assumption 2: Zero Conditional Mean Assumption 3: No Perfect Collinearity Assumption 4: Homoskedasticity Assumption 5: No Autocorrelation Assumption 6: Normality A residual analysis would help to test if some of the above assumptions are valid. Residual is defined as the difference between and while the error variable is defined as the difference between t and Assuming that the regression model is true, the is an approximation of theExplanation / Answer
1. b)
2.) c)
3.) Residual:- Y-bar ,E(Y),
Error:- Y, Y hat,
residual,error variable
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