Assumption 1: Linear regression model. The regression model is linear in the parameters,as shown in
1 2
i
i
i
Y
X
where,
Y is the regressandY and the regressorX may be nonlinear.
Assumption 2: X values are fixed in repeated sampling.
Values taken by the regressorXare considered fixed in repeated samples. More precisely, X is assumed to be nonstochastic.
Assumption 3: Zero means value of disturbance
i
. That is, given the value of X, the mean value of the random disturbance term
i
is zero. This shows that the uncertain mean value of
i
is zero, as shown in
(
|
)
0
i
i
E
X
…[02]
Assumption 4: Equal variance of
i
. If given the value of X, the variance of
i
is the same for all observations. Which means that the uncertain variances of
i
are alike, as shown in.
INTRODUCTION TO ECONOMETRICS II ECO 306 Share with your friends: |
