Residuals e against the values of explanatory variable

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A simple linear regression, y = β0 + β1X + e, is estimated with cross-sectional data. The resulting residuals e, along with the values of the explanatory variable x, are shown below.

x 1 2 5 7 10 14 15 20 24 30

e -2 1 -3 2 4 -5 -6 8 11 -10

(a) Graph the residuals e against the values of the explanatory variable x and look for any discernible pattern. (b) Which assumption(s) is being violated? Discuss its consequences and suggest a possible remedy. (c) List the three OTHER common violations associated with OLS. Discuss why they might occur, list their consequences, and suggest ways in which they can be corrected.

Reference no: EM131163907

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