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Please answer true / false / uncertain to the statement and EXPLAIN THE ANSWER. Running a...

Please answer true / false / uncertain to the statement and EXPLAIN THE ANSWER.

Running a regression requires the error term (denoted by Greek letter epsilon) to be a normally-distributed variable.

Math   Statistics-And-Probability   
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Homework Answers

Answer #1

The regression model is given by:

In the above model, denotes the error term.

Yes, one of the requirements of the regression model is that the error term is to be normally distributed.

Hence, answer - "TRUE"

Explanation:

There are some unknown factors which influence the value of . These factors could range from measurement errors or errors made due to human biases while deciding on the variables in the equation. These are unpredictable factors and the influence of these factors on the final model tends to be small.

The error term is composed of these influences and as these number of influences become larger, the error terms approximates a normal distribution.

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