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Which of the following assumptions do we make while deriving linear regression parameters?

  1. The true relationship between dependent y and predictor x is linear
  2. The model errors are statistically independent
  3. The errors are normally distributed with a 0 mean and constant standard deviation
  4. The predictor x is non-stochastic and is measured error-free

A. 1,2 and 3.

B. 1,3 and 4.

C. 1 and 3.

D. All of above.

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Solution: D

When deriving regression parameters, we make all the four assumptions mentioned above. If any of the assumptions is violated, the model would be misleading.


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