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    Question

    Autocorrelation violates which assumption of

    CLRM?
    A The error terms are normally distributed. Correct Answer Incorrect Answer
    B The error terms have a constant variance (homoscedasticity). Correct Answer Incorrect Answer
    C The error terms are uncorrelated across observations. Correct Answer Incorrect Answer
    D The relationship between the independent and dependent variables is linear. Correct Answer Incorrect Answer

    Solution

    Autocorrelation violates the assumption of the Classical Linear Regression Model (CLRM) that the error terms are uncorrelated across observations. This means that the error at one point in time or observation is correlated with the error at another, leading to inefficient and biased standard errors.

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