Question

In regression analysis, which of the following is a required assumption about the error term E

a. The values of the error terms are dependent

b.The errors are uniformly distributed .

c.The errors are all positive .

d. None of the above

Answer 1

Do rate the answer

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Answer: d) None of the above

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The values of the error terms are independent, that is there is no autocorrelation

The errors are normally distributed

The mean of errors is zero,  all positive errors cancel out negative ones

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When working with a linear regression model, we will make the following assumptions, called the Gauss-Markov Assumptions:

1. The relationship between XX and YY is determined by a linear model of the form Y=β0+β1X+εY=β0+β1X+ε.

2. Seperate observations of εε are independent from one another.

3. The error term εε is normally distributed with a mean of 0 and standard deviation σσ. That is, ε∼N(0,σ2)ε∼N(0,σ2).

4. The error term εε is independent from XX. In particular, the variance σ2σ2 does not depend on XX.