Expectational Error

The Expectational Error about a variable is the difference between the actual value a variable takes and the expected value of the variable. It is present due to large number of factors guiding the human behavior. For example, statistical errors, errors due to wrong interpretation of variables etc. The error also arises because there are large numbers of variables determining a particular variable and it is not feasible for anyone to incorporate all the variables. Hence, the error term also represents such variables which affect the variable being determined but cannot be included in the model.