u_i ~ N(0, $\sigma$²) indicates that the true error terms are normally distributed with an expected value of 0 and that each true error term has a variance equal to some constant, $\sigma$².

Question

Quizplus · Accepted Answer

The notation "~ N(0, ?²)" implies that the subject (in this case, the true error terms) follows a normal distribution with a mean (expected value) of 0 and a variance denoted by "?²," indicating that each error term has a constant variance, which is a fundamental assumption in many statistical models, including linear regression.

Ui ~ N(0 σ\sigmaσ 2) Indicates That the True Error Terms Are Normally Distributed

U_i ~ N(0 $\sigma$ ²) Indicates That the True Error Terms Are Normally Distributed