Chp3 - Regression Diagnostics and Variable Transformation...

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Regression Diagnostics and Variable Transformation For the normal error regression model: Y i = β 0 + β 1 X i + ± i ; i =1 , ··· ,n, (1) where: 1. β 0 and β 1 are parameters 2. X i are known constants 3. ± i are independent N (0 2 ). We will consider the adequacy of the linear model, β 0 + 1 , error dis- tribution assumption of ± , and outliers. Subjective graphical approach and formal statistical tests will be discussed. Variable transformation will be used to make adjustments. 1 Six Types of Departure from Regression Model (1) The regression function is not linear. Other important predictor variables have been omitted from the model. ± have non-constant variance. ± are not independent. ± are not normally distributed. The model ±ts all but few outlier observations. 2
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Univariate Graphical Summary Histogram and Stem-and-Leaf Plot: discrete distribution density estimation Boxplot: graphical summary of important numbers (median, quar- tile and outliers) Sequence plot: exploration of time pattern Quantile-Quantile Plot 3 Toluca Company Data: WorkHours Histogram of WorkHours WorkHours Frequency 100 200 300 400 500 600 02468 Box Plot 5 1 01 52 02 5 100 200 300 400 500 Sequence Plot Index WorkHours -2 -1 0 1 2 100 200 300 400 500 Normal Q-Q Plot Theoretical Quantiles Sample Quantiles 4
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Quantile-Quantile (Probability) Plot Let { y (1) , ··· ,y ( n ) } denote the order statistics of n samples from a dis- tribution with the form F [( μ ]. To construct the probability plot, the sample order statistic i is plotted against x 1 p where estimates W ), where =( . is also called the plotting positions. and Φ ) are both quantile estimates. The probability plot is also called the quantile-quantile plot. 5 Some commonly used forms of plotting positions = +1 , which is actually equal to E [ )]. (2) 0 375 +0 25 , which approximates )] for the normal distribu- tion. Simulation studies suggest that this is a good approximation. (3) 3175 365 ,i<n ; =0 /n M )], · ) is the median function. Routine in R: qqnorm{WorkHours}; qqline{WorkHours} 6
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Residual Properties Most of our diagnostics concern the distribution of errors ± i .Inap- plication, we usually estimate by the residuals e = Y ˆ .Aswe discussed earlier, n X =1 =0; =0 . The residuals are linear functions of , so their joint distributions are multivariate normal. We know E ( )= b 0 + 1 )=0and the covariance matrix are Var( ¯ ) 2 j σ Cov( ,e )( 7 In our model assumptions, the errors are independent. But their estimate are dependent. The reason is that all observations are pooled
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This note was uploaded on 10/30/2011 for the course AMS 578 taught by Professor Finch,s during the Spring '08 term at SUNY Stony Brook.

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Chp3 - Regression Diagnostics and Variable Transformation...

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