Which one of the following is NOT an assumption of the classical linear regression model?
A) The explanatory variables are uncorrelated with the error terms.
B) The disturbance terms have zero mean
C) The dependent variable is not correlated with the disturbance terms
D) The disturbance terms are independent of one another.

Question

Quizplus · Accepted Answer

The classical linear regression model assumes that the explanatory variables are uncorrelated with the error terms, the disturbance terms have zero mean, and the disturbance terms are independent of one another. However, it does not assume that the dependent variable is uncorrelated with the disturbance terms; in fact, the dependent variable is expected to be correlated with the disturbance terms since the disturbances represent unexplained factors in the model that directly affect the dependent variable.

Which One of the Following Is NOT an Assumption of the Classical