3. Model assumptions Aa Aa In a multiple regression model with p independent var

Question

3. Model assumptions Aa Aa In a multiple regression model with p independent variables, that is, y = 0 + |X1 + … + pXp + , you have the following assumptions Assumption 1: The error term e is a random variable with a mean of zero; that is, E(E)-0 for all values of the independent variables x Assumption 2: The variance of , denoted by 2, is the same for all values of the independent variables x1, X2, , Xp. Assumption 3: The values of are independent Assumption 4: The error term is a normally distributed random variable. The residuals plotted against y, the predicted value of y, can be used to validate the assumptions of the multiple regression model

Explanation / Answer

1) No assumption is vilated.

2) - Assumption 1 is violated since residuals are linearly increasing and are not random.

3)- Assumption 2 is violated since variance is increasing with increasing values of y.

4- Assumption 4 is violated since residuals are not normally distributed.

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