Econometrics: Classical Assumption 2 – The error term has a zero population mean.

When the intercept term is present in any given regression equation, it forces the average of the error term to be equal to zero. This occurs because the intercept, when included, will account for the fixed portion change of the dependent variable and the explanatory variables will account for the non-fixed portion. Therefore, the error term …

Econometrics: Classical Assumption 2 – The error term has a zero population mean. Read More »