4.1.2.0 OBJECTIVE The main objective of this unit is to provide a general understanding of the topic stochastic regressors and measurement errors and point out that random element in a regression model is not the only disturbance term but that the variables themselves do have random components.
4.1.3.0 MAIN CONTENTS
4.1.3.1 Stochastic Regressors
Based on the adopted assumption that the regressors, which is the explanatory variables in the regression model are nonstochastic, their values in the sample are therefore fixed and unaffected by the way the sample is generated. Perhaps the best example of a nonstochastic variable is time, which, as we will see when we come to time series analysis, is sometimes included in the regression model as a proxy for
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