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A fellow researcher fits a simple linear regression model Yi = + Xi + ui by least squares, but has doubts that the first least squares assumption...
A fellow researcher fits a simple linear regression model Yi = α + βXi + ui by least squares, but hasdoubts that the first least squares assumption E(ui |Xi) = 0 is correct for her data set. She decides totest for this assumption by calculating the residuals from her regression ûi = Yi - Ŷi and thenperforming the usual t-test of the null hypothesis that their (population) mean is zero, assuming theerrors are normally distributed. Evaluate her strategy.
A fellow researcher fits a simple linear regression model Yi = α + βXi + ui by least squares, buthasdoubts that the first least squares assumption E(ui |Xi) = 0 is correct for her data set....