Assumption 3, exogeneity of explanatory variables requires that the explanatory variables in the model do not explain variation in the error terms, formally we express assumption 3 as Continue reading CLRM – Assumption 3: Explanatory Variables must be exogenous →

Assumption 2 requires the matrix of explanatory variables to have full rank. This means that in case matrix is a matrix the rank of matrix is . Namely,

Continue reading CLRM – Assumption 2: Full Rank of Matrix X →