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Which of the following statements is correct regarding the multiple regression model? A)The assumption var(e_i│X)=〖var(y_i│X)=σ〗^2 implies...

Which of the following statements is correct regarding the multiple regression model?

A)The assumption var(e_i│X)=〖var(y_i│X)=σ〗^2 implies that the error variance is constant and therefore heteroscedastic.

B) The assumption var(e_i│X)=〖var(y_i│X)=σ〗_i^2 implies that the error variance is constant and therefore homoscedastic.

C) If var(e_i│X)=〖var(y_i│X)=σ〗_i^2 then the error variance may change from observation to observation and therefore heteroscedastic.

D) If var(e_i│X)=〖var(y_i│X)=σ〗^2 then the error variance may change from observation to observation and therefore homoscedastic.

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Answer #1

Answer :

(C) If var(e_i / X) = then the error variance may change from observation to observation and therefore heteroscedastic.

Explanation:

The multiple regression model assumes that Var(e_i / X) = i.e. the variance of error term,given the values of , is constant and therefore homoscedastic.

If Var(e_i / X) = ,then the error variance may change from observation to observation and therefore heteroscedastic.

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