E(u_i | X_i)= 0 says that A)dividing the error by the explanatory variable results in a zero (on average). B)the sample regression function residuals are unrelated to the explanatory variable. C)the sample mean of the Xs is much larger than the sample mean of the errors. D)the conditional distribution of the error given the explanatory variable has a zero mean.

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Quizplus · Accepted Answer

The notation E(u|X) = 0 indicates that the expected value (or mean) of the error term (u), given the explanatory variable (X), is zero. This means that the conditional distribution of the error, given the explanatory variable, has a mean of zero, which is a key assumption in linear regression models to ensure unbiased estimators.

E(ui | Xi)= 0 Says That

E(u_i | X_i)= 0 Says That