Assumptions on the Multiple Linear Regression Model - Expected Value of Error Term conditional on ind. var.

CFA Level II Quant
#1

Hey folks,

so one assumption on the Multiple Linear Regression Model is that "The expected value of the error term, conditional / conditioned on the independent variables is zero".

What exactly does it mean that it is conditional on the independent variable and why is this part of the assumption relevant?

Thanks a lot!

#2

This assumption means that the residual is independent to the independent variables. And without this assumption, heteroscedasticity occurs.