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The model has no heteroskedasticity (meaning the variance of the error is the same regardless of the independent variable's value). The model has no autocorrelation (the error term doesn't exhibit a systematic relationship over time). If one (or more) of the CLRM assumptions isn't met (which econometricians call failing), then OLS may not be the best estimation technique. Fortunately, econometric tools allow you to modify the OLS technique or use a completely different estimation method if the CLRM assumptions don't hold.
Heteroskedasticity
The variance of the error term changes in response to a change in the value of the independent
variables. Autocorrelation An identifiable relationship (positive or negative) exists between the values of the error in one period and the values of the error in another period. Inefficient coefficient estimates Biased standard errors Unreliable hypothesis tests Geary or runs test DurbinWatson test BreuschGodfrey test 1. CochraneOrcutt transformation 2. PraisWinsten transformation 3. NeweyWest robust standard errors
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