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Unformatted text preview: SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression Classical Linear Regression Model SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression 1. Assumptions A. (CLRM.I) Linear in Parameters : may or may not be linear in the variables. The regression model has an additive error term SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression 1. Assumptions A. (CLRM.I) Linear in Parameters : may or may not be linear in the variables. The regression model has an additive error term B. (CLRM.II) No Endogeneity : All explanatory variables X s are uncorrelated with the stochastic error term. ) ,..., 2 , 1 ( ) , cov( K k X k SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression 1. Assumptions (continued) C. (CLRM.III) E ( ε all X s) = 0. SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression 1. Assumptions (continued) C. (CLRM.III) E ( ε all X s) = 0. D. (CLRM.IV) Homoscedasticity : The variance of each ε is constant. N i i ,..., 2 , 1 ) var( 2 SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression Homoscedasticity Heteroscedasticity SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression 1. Assumptions (continued) C. (CLRM.III) E ( ε all X s) = 0. D. (CLRM.IV) Homoscedasticity : The variance of each ε is constant. E. (CLRM.V) No Autocorrelation (Serial Correlation): The error terms are uncorrelated with each other. N i i ,..., 2 , 1 ) var( 2 j i j i ) , cov( SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression No Autocorrelation Positive Autocorrelation Negative Autocorrelation SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression Topic 17, Page 8 SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression SUNY at Albany  Department of Economics Eco 320 Economic Statistics • Regression 1. Assumptions (continued) C. (CLRM.III) E ( ε all X s) = 0....
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 Spring '11
 Chan
 Economics

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