(Requires Appendix)The sample average of the OLS residuals is
A)some positive number since OLS uses squares.
B)zero.
C)unobservable since the population regression function is unknown.
D)dependent on whether the explanatory variable is mostly positive or negative.

Question

Quizplus · Accepted Answer

The sample average of the OLS residuals is simply the average of the deviations between the observed values and the predicted values. Since OLS aims to minimize the sum of squared deviations, this means that the average of the residuals will always be as close to zero as possible. Therefore, the correct answer is B, which states that the sample average of the OLS residuals is zero.

(Requires Appendix)The Sample Average of the OLS Residuals Is