ECS3706 ASSIGNMENT 2 SEMESTER 2 – 2023

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ECS3706 ASSIGNMENT 2 SEMESTER 2 – 2023

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. List three differences between the stochastic
error term and the residual

(b) Explain in detail how Ordinary Least Squares (OLS) works in estimating the coefficients
of a linear regression model.

(c) Demonstrate your understanding of the goodness of fit by referring to the total, explained, and
residual sum of squares.

(d) Explain the Gauss Markov Theorem and discuss the importance of this theorem in econometrics.

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