7assumptions

Question 1

The classical assumptions

Answer 1

1.The regression model is linear, correctly specified, and has an additive error term.
2.The error term has a zero population mean.
3.All explanatory variables are uncorrelated with the error term (no endogeneity).
4.The error term has a constant variance (no heteroscedasticity).
5.No explanatory variable is a perfect linear function of another explanatory variable (no perfect multicollinearity).
6.Observations of the error term are uncorrelated with each other (no serial correlation).
7.The error term is normally distributed (required for the model to be the best unbiased estimator (BUE), not necessarily BLUE).