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Introduction to Statistical Methods and Econometrics — Economics STD 12 — Question

Tamilnadu BoardEnglish MediumSTD 12EconomicsIntroduction to Statistical Methods and Econometrics5 Marks
Question
Explain the explanatory variables Assumptions?
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Answer

The explanatory variables are called assumptions.
Assumptions:
  1. “U” is a random real variable. That is “U” may assume positive, negative or zero values. Hence the mean of the “U” will be zero.
  2. The variance of “U” is constant for all values of “U”
  3. The “U” has a normal distribution.
  4. The Covariances of any U. with any other U are equal to zero
  5. “U” is independent of explanatory variable (s)
  6. Explanatory variables are measured without error.
  7. The explanatory variables are not perfectly linearly correlated.
  8. The variables are correctly aggregated.
  9. The relationship is correctly identified and specified.
  10. Parameters are linear.

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