3. Normality of Error Terms
- We need to consider that our Error Term is normally distributed.
- We only need Normal Distribution while making Statistical Inferences.
- T-tests and F-tests work because we have assumed normality.
- If Error Term isn't normally distributed then we can use Central Limit Theorem.
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These are some of the Assumptions to be pondered while Applying Ordinary Least Square Method and Performing Regression Analysis.
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