econometrics quiz 3

classical assumption #1

regression models linear in coefficients, correctly specified, and has an additive error term

classical assumption #2

error term has population mean of zero

classical assumption #3

all explanatory variables are uncorrelated with the error term

classical assumption #4

observations of error term are uncorrelated with each other (no serial correlation)

classical assumption #5

error term has constant variance (no heteroskedasticity)

classical assumption #6

no explanatory variable is a perfect linear function of any other explanatory variable (no perfect multicollinearity)

classical assumption #7

error term is normally distributed (optional)

gavis-markov theorem

given classical assumptions 1-6 the ordinary least squares estimator is minimum variance estimator from among the set of all linear unbiased estimators

B.L.U.E

best, linear, unbiased, estimator (minimum variance)