Econometrics: Classical Assumption 6 – No explanatory variable is a perfectly linear function of any or all of the other explanatory variables.

Two variables are a perfectly linear function of each other when one variable can be entirely explained by the movement in the other variable and vice versa even though the absolute change in each variable may differ. Examples of positively perfectly collinear variables would include age and experience or sales and taxes paid. Whereas examples …

Econometrics: Classical Assumption 6 – No explanatory variable is a perfectly linear function of any or all of the other explanatory variables. Read More »