A simple linear regression, y 0 1 x , is estimated with cross sectional data The resulting residuals e along with the values of the explanatory variable x are shown in the accompanying table a Graph the residuals e against the values of the explanatory variable x and look for any discernible pattern b Which assumption is being violated Discuss its consequences and suggest a possible remedy 11 4 10 8 4 14 6 6 16 11 1 1

Question: A simple linear regression, y = ? 0 + ? 1 x + ?, is estimated with cross-sectional data. The resulting residuals e along with

A simple linear regression, y = ?₀ + ?₁x + ?, is estimated with cross-sectional data. The resulting residuals e along with the values of the explanatory variable x are shown in the accompanying table.

11 4. 10 8. 4 14 -6 -6 - 16 -11 -1

a. Graph the residuals e against the values of the explanatory variable x and look for any discernible pattern.

b. Which assumption is being violated? Discuss its consequences and suggest a possible remedy.

11 4. 10 8. 4 14 -6 -6 - 16 -11 -1 -1

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