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ECS3706 Assignment 2 Semester 2 2023ย Due Date: 29 September 2023 (Complete Answers)
ECS3706 Assignment 2 Semester 2 2023 Complete answers for all the questions provided in your assignment.ย ย All answers have been completed in accordance with the corresponding questions and should be used as guidelines.
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QUESTIONย A1
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a.
ยทย Definition: The stochastic error term, also known as the disturbance term or theย random error term, represents the unexplained variation in the dependent variableย thatย cannotย beย accountedย forย byย theย independentย variables.ย Itย isย aย theoreticalย conceptย that is not directly observable. On the other hand, the residual refers to the actualย differenceย betweenย theย observedย valueย ofย theย dependentย variableย andย theย predictedย value based on the independent variables. It is calculated as the observed valueย minus theย predictedย value.
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ยทย Representation: The stochastic error term is typically denoted byย “ฮต” or “u” inย equationsย andย models,ย whereasย theย residualย isย denotedย byย “e”ย orย “r”.ย Theย stochasticย error term is usually represented in mathematical equations and models, while theย residualย isย calculatedย andย observedย in numericalย values.
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10 pages
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