Regression Diagnostics
Free GARP FRM Part I lesson in Quantitative Analysis. 19 min read, ~2,841 words.
OLS is BLUE (Best Linear Unbiased Estimator) only when the Gauss-Markov assumptions hold: linearity, zero-mean errors, homoskedasticity, no autocorrelation, no perfect collinearity. Heteroskedasticity and autocorrelation leave the coefficient estimates unbiased but ruin the standard errors; fix heteroskedasticity with White-robust SEs, not by re-estimating beta. Multicollinearity does not bias coefficients but...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
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