Which of these assumptions means the errors are uncorrelated with all x's? A)E(e_it)= 0 B)var(e_it)= E(e²_it)= $\sigma$ ² C)cov(e_it,e_js)= E(e_it,e_js)= 0 for i j or t s D)cov(e_it,x_2it)= 0,cov(e_it,x_3it)

Question

Quizplus · Accepted Answer

The correct assumption that means the errors are uncorrelated with all x's is that the covariance between the errors and each independent variable (x) is zero. This is directly stated in option D, where the covariance between the error term and different x variables is equal to zero, indicating that the errors are uncorrelated with the independent variables.

Which of These Assumptions Means the Errors Are Uncorrelated with All