Question

28. For the random variables, u₁, u₂, ..., u_N in the linear model, which kind of data set in the model tends to have those u's satisfying the assumptions of the Law of Large Number?

	A.	a time series data set.
	B.	a cross-sectional data set.
	C.	any kind of data set.
	D.	none of the above.

Answer 1

Answer is (A) " A time series data set "

The " Law of large number " in probability and statistics states that as a sample size grows, its mean gets closer to the average of the whole population or we can say that the average of the result obtained from a large number of trials should be close to the expected value and will tend to become closer to the expected value as more trials are performed.

# The law of Large Numbers also applies to time series data set also. For example:

It applies to the time series averages of . Since the mean of can be made arbitraly small by choosing to be small, we can control the local variations of time series averages of the random function

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