#### Praveen_India

##### Member

Reference: R11. P1.T2_Stock_v5

The three key assumptions of the ordinary least squares (OLS) linear regression model are the following:

1. Assumption # 1:

**This assumption is a formal mathematical statement about the “other factors” contained in the error term and asserts that these other factors are unrelated to the independent variable, X(i), in the following sense:**

__The conditional distribution of the error term, u(i), has a mean of zero.__

__given a value of X(i), the mean of the distribution of these other factors is zero.__Please can you explain the underlined statements. I understood that there should not be any relationship between u and X but the explanation given in terms of Distribution and Mean is something I am not able to understand.

Thanks,

Prveen