Econometrics Midterm Review CLRM

Flashcards covering key concepts related to econometric assumptions and regression analysis.

CLRM I

The regression model is linear, is correctly specified, and has an additive error term

CLRM II

II. The error term has a zero population mean

CLRM III

III. All explanatory variables are uncorrelated with the error term (no endogeneity)

CLRM IV

IV. Observations of the error term are uncorrelated with each other (no serial correlation)

CLRM V

V. The error term has a constant variance (no heteroskedasticity)

CLRM VI

VI. No explanatory variable is a perfect linear function of any other explanatory variable(s) (no perfect multicollinearity)

CLRM VII

VII. The error term is normally distributed (this assumption is optional but usually is invoked)

🧠 How to Explain (Conceptually)