Question

​​​​​​Econometrics

1. Explain not just list the nature and role of the OLS assumptions

Answer 1

Assumptions:
1. The linear regression is linear in parameters which mean that the independent variables have a linear relationship with the dependent variables. With the increase or decrease in independent variables, the dependent variables too increase or decrease
2. The sample selected is random in nature, means there is biased selection of samples for assessment
3. The conditional mean of error term is zero, means the residual which are left over from the repression models add up to zero
4. No multi-collinearity: The independent variables are not influenced by each other and there is no correlation among themselves