Well-structured ECS3706 Assignment 2 (ANSWERS) Semester 2 2023 - DISTINCTION GUARANTEED.. (DETAILED ANSWERS - DISTINCTION GUARANTEED!). QUESTION A1 (15 marks)
(a) One of the most challenging concepts to master in this module is distinguishing between the stochastic error term and the residual. Lis...
ECS3706
Assignment 2 Semester 2 2023
Unique Number:
Due Date: 29 September 2023
QUESTION A1
a.
Definition: The stochastic error term, also known as the disturbance term or the
random error term, represents the unexplained variation in the dependent variable
that cannot be accounted for by the independent variables. It is a theoretical concept
that is not directly observable. On the other hand, the residual refers to the actual
difference between the observed value of the dependent variable and the predicted
value based on the independent variables. It is calculated as the observed value
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