Appendix A andB LO

Appendix A andB LO - Appendix A/B Learning Objectives...

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Appendix A/B Learning Objectives Appendix A 1) Standardized Residual a. Subtract the mean and divide by the standard deviation. The mean is zero, and standard deviation is unknown, therefore we must estimate its value. The simplest estimate we can use is the standard error, therefore: Standardised residual for point i is: e i /s e 2) We can use excel to create a histogram of the residuals to check for non-normality. If it is bell shaped, then it is normal. 3) The variance of the error variable, is required to be constant. a. Heteroscedasticity- when this condition is violated. b. Homoscedascity- when this condition is followed. 4) Non-independence of the “error variable” a. When a pattern evolves between the error variables, their independence has been violated. b. Auto-correlated terms are error terms that hold a certain correlation over time. 5) An outlier is an observation that is unusually small or unusually large. a.
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Appendix A andB LO - Appendix A/B Learning Objectives...

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