Reading 11- LOS E (Part 1): Q6 likely, number, following, class

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6.Linear regression is based on a number of assumptions. Which of the following is least likely an assumption of linear regression?

A)   Values of the independent variable are not correlated with the error term.

B)   There is at least some correlation between the error terms from one observation to the next.

C)   A linear relationship exists between the dependent and independent variables.

D)   The variance of the error terms each period remains the same.

[此贴子已经被作者于2008-4-1 13:26:10编辑过]

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The correct answer was B)

When correlation exists, autocorrelation is present. As a result, residual terms are not normally distributed. This is inconsistent with linear regression.