Question

Which of the following statements are accurate about the population regression model?
(a) u_i is the stochastic component of Yi.
(b) a^ + B^Xi is the systematic component of Yi.
(c) Both (a) and (b) are correct.
(d) Neither (a) nor (b) are correct.

Answer 1

Answer:

Option (A) is the only accurate statement about a population regression model.

Explanation:

Option A is the only correct answer because ui is the stochastic component of Yi.

On the other hand, option B is incorrect. It would only be correct for a sample regression model. This is because alpha (α) and beta (β) have hats or caps on them. The hat shows that they are estimated values (estimated from the given/measured population values for Y and X).

In this duo-variable (two-variable) regression model, ui without a cap is the stochastic component of Yi.