Errors

The discussion of regressors emphasizes the point that left-out variables become part of the error term.  Here we consider a couple of issues that concern the errors by themselves.
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Overview

Heteroskedasticity
What if the variance of the errors is not constant?

[graph]  There is a simulation analysis of heterskedasticity.

Serial Correlation
What if the errors are not independent of each other?

[sim] Simulation study of serially correlated errors.