Why is the variance of the forecast y larger than the variance of the expected value of y? A)the estimated forecast variance includes an estimate of $\sigma$² B)the estimated forecast variance includes weighted covariance terms of all paired variables C)the Gauss-Markov theorem does not apply to forecast of a single observation D)the expected value of confidence intervals rely on the standard normal distribution while forecast use a t distribution.

Question

Quizplus · Accepted Answer

The estimated forecast variance includes an estimate of F1F1F1S1F1F1F10̂², which is the variance of the error term in the regression model. This error term represents the variability of the data that cannot be explained by the regression model. Hence, the forecast variance is larger than the variance of the expected value of y, which only considers the variability explained by the regression model.

Why Is the Variance of the Forecast Y Larger Than σ\sigmaσ

Why Is the Variance of the Forecast Y Larger Than $\sigma$