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What is the role of the stochastic error term in regression analysis?
Regression analysis is based on the assumption that the dependent variable is distributed according some function of the independent variables together with independent identically distributed random errors. If the error terms were not stochastic then some of the properties of the regression analysis are not valid.
The regression equation is determined by minimizing?
The total squared error between the predicted y values and the actual y values
In a good regression model the residual plot shows?
a random pattern
What is stochastic error term?
A Stochastic error term is a term that is added to a regression equation to introduce all of the variation in Y that cannot be explained by the included Xs. It is, in effect, a symbol of the econometrician's ignorance or inability to model all the movements of the dependent variable.
How do you calculate regression equation?
what is the equation of the regression line for the given data(Age, Number of Accidents) (16, 6605), (17, 8932), (18, 8506), (19, 7349), (20, 6458), (21, 5974)
