Question

Choose the correct answer:

If all the classical assumption hold the estimated slope is randomly above or below the population slope.

If all the classical assumption hold the estimated slope will always be equal to the population slope.

If all the classical assumption hold the estimated T values will be high.

If all the classical assumption hold the R squared of the regression will be very high.

Answer 1

The classical assumptions of linear regression:

1. The regression model is linear in the coefficients and the error term

2. The error term has a population mean of zero and a constant variance.

3. All independent variables are uncorrelated with the error term

4. Dependent variables are uncorrelated with each other

5. No independent variable is a perfect linear function of other independent variables

6. The error term is normally distributed (optional)

When the above assumptions for linear regression are true, ordinary least squares produces the best estimates and hence

the R squared of the regression will be very high.

So

Option: If all the classical assumption hold the R squared of the regression will be very high.