class10-06 - Econ 444, Wednesday November 1, class 10...

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Econ 444, Wednesday November 1, class 10 Robert de Jong 1 1 Department of Economics Ohio State University Robert de Jong Econ 444, Wednesday November 1, class 10
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Monday November 1 1 Exercise for today: model assumptions 2 New material Robert de Jong Econ 444, Wednesday November 1, class 10
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The model assumptions: 1 The regression model is linear in the coefficients, is correctly specified, and has an additive error term. 2 The error term has a zero population term. 3 All explanatory variables are uncorrelated with the error term. 4 Observations of the error term are uncorrelated with each other (no serial correlation). 5 The error term has a constant variance (no heteroskedasticity). 6 No explanatory variable is a perfect linear combination of any other explanatory variable(s) (no perfect multicollinearity). 7 The error term is normally distributed (this assumption is optional but usually is invoked). Robert de Jong Econ 444, Wednesday November 1, class 10
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Exercise for today 1 Linearity assumption: model assumption 1. 2 The assumption of no heteroskedasticity: Assumption 5. 3 The “no serial correlation” assumption: Assumption 4. 4 Endogeneity: Assumption 3; also Assumption 4 (“no serial correlation”). 5 1 There should be no hats on the betas. 2 There should be hats on the betas. 3 There should be no hat on β 1 .
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This note was uploaded on 04/13/2009 for the course ECON 444 taught by Professor Ogaki during the Fall '07 term at Ohio State.

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class10-06 - Econ 444, Wednesday November 1, class 10...

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