In regression model, assumptions of error term are:

(A) Zero-mean assumption

(B) Constant-variance assumption

(C) Dependence assumption

(D) Independence assumption

(E) Normality assumption

Choose the correct answer from the options given below:

The correct answer is (A), (B), (D), (E) only.

Key Points Assumptions of a regression model:

• The basic assumption of the linear regression model, as the name suggests, is that of a linear relationship between the dependent and independent variables.
• Here the linearity is only with respect to the parameters.
• Another assumption is that the independent variables are not correlated with each other.
• If there is a linear relationship between one or more explanatory variables, it adds to the complexity of the model without being able to delineate the impact of each explanatory variable on the response variable.
• The residuals in the linear regression model are assumed to be independently and identically distributed

Hence, the correct answer is (A), (B), (D), (E) only.