Economics · Econometrics
Given below are two statements regarding the Ordinary Least Squares (OLS) method: Statement I: One of the assumptions under the OLS method states that the regression model is linear in the parameters, though it may or may not be linear in the variables. Statement II: The variance of the error, or disturbance, term is not the same regardless of the value of the explanatory variable under OLS. In light of the above statements, choose the most appropriate answer from the options given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Statement I is incorrect but Statement II is correct
- 2Statement I is correct but Statement II is incorrect✓
- 3Both Statement I and Statement II are incorrect
- 4Both Statement I and Statement II are correct
Correct answer
Statement I is correct but Statement II is incorrect
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