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What are the assumptions underlying linear regression?

October 27, 2015
  1. The relationship between the dependent variable (Y) and the independent variable (X) is linear.
  2. The independent variable is not random.
  3. The expected value of the error or residual is zero.
  4. The variance of the error term is constant for all observations or homskedastic.
  5. The error terms are uncorrelated between observations.
  6. The error terms have a normal distribution.
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From → Quant

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