Econometric Theory/Terminology and Notation
Terminology and Notation
Above we discussed dependent variables and explanatory variables. There are many synonyms of various terms and these are no exception. The dependent variable can also be called:
- Explained variable
- Controlled variable
and the explanatory variable:
- Independent variable
- Control variable
If we have one explanatory variable. We get what is called two-variable (simple) regression analysis. If we include more than one explanatory variable, it is called multiple regression analysis.
The error term is assumed to be random or stochastic variable. It implies that it can take any value within a given probability distribution and there are no other factors determining it. If other influences were known, it would no longer be random.
- Gujarati, D.N. (2003). Basic Econometrics, International Edition - 4th ed. McGraw-Hill Higher Education. pp. 24-25. ISBN 0-07-112342-3.