Regression Diagnostics
Free GARP FRM Part I lesson in Quantitative Analysis. 18 min read, ~2,736 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 leaves the coefficient estimates unbiased but ruins the standard errors, fix with White-robust SEs, not by re-estimating beta. Multicollinearity does not bias coefficients but inflates their variance...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
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