For time series data, where time dependency exists, which of the 5 assumptions under which the Gauss Markov theorem holds is violated. Explain.

Expert Solution

Gauss Markov model is based on following 5 assumptions :

Linearity
Random
Exogeneity
Non collinearity
Homoscedasticity

Out of which the time series data doesn't hold true or violates is the "Non Collinearity" assumption as time series regression model is auto correlated and thus based on gauss markov the analysis must be non collinear and regressors should not be perfectly correlated.

Rahul Sunny answered 2 years ago

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