1. To understand the meaning, reasons and consequences of the violation of assumptions of the regression model.
2. To acquaint the students with the detection and remedial methods of multicollinearity, heteroscedasticity and autocorrelation.
3. To appraise the students with the estimation and interpretation of models with dummy independent variables.
Meaning, reasons, consequences, detection and remedies of the problem of multicolliearity.
Meaning, reasons, consequences, detection ( graphical method and B-P-G test) and remedies (weighted least squares method, root transformation and log transformation) of the problem of heteroscedasticity.
Meaning, reasons, consequences, detection (graphical method and D-W test) and remedies ( generalized difference equations and Prais-Winsten transformation) of the problem of serial correlation.
Meaning of model specification, Specification error- omission of a relevant variable; inclusion of irrelevant variable; errors of measurement, tests of specification errors.
Nature of dummy variables; ANOVA and ANCOVA models; caution in the use of dummy variable-the dummy variable trap; the dummy variable alternative to the chow test; Interaction effects using dummy variables.
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