Assumptions of CLRM

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Example of simple linear model

Yi=α+βxi+ϵi.

what are parameters?

In this example, the parameter α is called the constant or intercept, and represents the expected response when xi=0

what are parameters?

The parameter β is called the slope, and represents the expected increment in the response per unit change in xi.

Assumption-1

Model should be linear in parameters.. 

Assumption-2

None of the independent variables have linear relationship with any other independent variables. 

Assumption-3

None of the independent variables are correlated with mean of error. 

Assumption-4

Error term observation are independent to each other OR they are not correlated to each other.. 

Assumption-5

Mean of error term are zero.. 

Assumption-6

Error term has a constant variance. {i.e., no Heteroscedasticity}.. 

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Assumption-7

The error term is normally distributed.

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