Residual Analysis

Chapter 8

Model Assumptions

Independence (response variables y i are

independent)- this is a design issue
Normality (response variables are normally
distributed)
Homoscedasticity (the response variables
have the same variance)

Best way to check assumptions: check the

assumptions on the random errors

They are independent

They are normally distributed
They have a constant variance 2 for all settings of the
independent variables (Homoscedasticity)
They have a zero mean.

If these assumptions are satisfied, we may use the normal density

as the working approximation for the random component. So,
the residuals are distributed as:
i ~ N(0,2)

Plotting Residuals

To check for homoscedasticity (constant variance):

Produce a scatterplot of the standardized residuals against

the fitted values.
Produce a scatterplot of the standardized residuals against
each of the independent variables.

If assumptions are satisfied, residuals should vary

randomly around zero and the spread of the residuals
should be about the same throughout the plot (no
systematic patterns.)

Homoscedasticity is probably violated if

The residuals seem to increase or decrease in

average magnitude with the fitted values, it is
an indication that the variance of the residuals
is not constant.

The points in the plot lie on a curve around

zero, rather than fluctuating randomly.

A few points in the plot lie a long way from

the rest of the points.

Heteroscedasticity

Not fatal to an analysis; the analysis is

weakened, not invalidated.

Detected with scatterplots and rectified through

transformation.

http://www.pfc.cfs.nrcan.gc.ca/profiles/wulder/mvstats/transform_e.html
http://www.ruf.rice.edu/~lane/stat_sim/transformations/index.html

Cautions with transformations

Difficulty of interpretation of transformed

variables.

The scale of the data influences the utility of

transformations.

If a scale is arbitrary, a transformation can be more

effective
If a scale is meaningful, the difficulty of interpretation
increases

Normality

The random errors can be regarded as a random

sample from a N(0,2) distribution, so we can check
this assumption by checking whether the residuals
might have come from a normal distribution.
We should look at the standardized residuals
Options for looking at distribution:

Histogram, Stem and leaf plot, Normal plot of residuals

http://statmaster.sdu.dk/courses/st111/module04/index.html

Histogram or Stem and Leaf Plot

Does distribution of residuals approximate a

normal distribution?

Regression is robust with respect to

nonnormal errors (inferences typically still
valid unless the errors come from a highly
skewed distribution)

Normal Plot of Residuals

A normal probability plot is found by plotting the

residuals of the observed sample against the
corresponding residuals of a standard normal
distribution N (0,1)

If the plot shows a straight line, it is reasonable to

assume that the observed sample comes from a normal
distribution.
If the points deviate a lot from a straight line, there is
evidence against the assumption that the random errors
are an independent sample from a normal distribution.

http://www.skymark.com/resources/tools/normal_test_plot.asp

:Variance of the random error

If this value equals zero

all random errors equal 0
Prediction equation () will be equal to mean value E(y)
If this value is large
Large (absolute values) of
Larger deviations between and the mean value E(y).
2

The larger the value of , the greater the error in estimating

the model parameters and the error in predicting a value of
y for specific values of x.

Variance is estimated with

(MSE)

The units of the estimated variance are

squared units of the dependent variable y.
For a more meaningful measure of variability,
we use s or Root MSE.
The interval 2s provides a rough estimation
with which the model will predict future
values of y for given values of x.

Why do residual analysis?

Following any modeling procedure, it is a

good idea to assess the validity of your model.
Residuals and diagnostic statistics allow you
to identify patterns that are either poorly fit by
the model, have a strong influence upon the
estimated parameters, or which have a high
leverage. It is helpful to interpret these
diagnostics jointly to understand any potential
problems with the model.

Outliers

What:

Why:

An observation with a residual that is larger than 3s or a

standardized residual larger than 3 (absolute value)
A data entry or recording error, Skewness of the
distribution, Chance, Unassignable causes

Then what?

Eliminate? Correct? Analyze them?

How much influence do they have? How do I know?
Minitab Storage: Diagnostics (Leverages, Cooks
Distance, DFFITS)

Leverages- p. 403

Identifies observations with unusual or outlying xvalues.

Leverages fall between 0 and 1. A value greater than
2(p/n) is large enough to suggest you should
examine the corresponding observation.

p: number of predictors (including constant)

n: number of observations

Minitab identifies observations with leverage over

3(p/n) with an X in the table of unusual observations

Cooks Distance (D)- p. 405

An overall measure of the combined impact of each

observation on the fitted values. Calculated using
leverage values and standardized residuals.
Considers whether an observation is unusual with
respect to both x- and y-values.
Observations with large D values may be outliers.

Compare D to F-distribution with (p, n-p) degrees of

freedom. Determine corresponding percentile.

Less than 20%- little influence

Greater than 50%- major influence

DFFITS- p. 408

The difference between the predicted value when all

observations are included and when the ith observation is
deleted.
Combines leverage and Studentized residual (deleted t
residuals) into one overall measure of how unusual an
observation is
Represent roughly the number of standard deviations that the
fitted value changes when each case is removed from the data
set. Observations with DFFITS values greater than 2 times
the square root of (p/n) are considered large and should be
examined.

p is number of predictors (including the constant)

n is the number of observations

Summary of what to look for

Start with the plot and brush outliers

Look for values that stand out in diagnostic measures
Rules of thumb

Leverages (HI): values greater than 2(p/n)

Cooks Distance: values greater than 50% of comparable F
(p, n-p) distribution
p
2
DFFITS: values greater than
n

Lets do an example

Returning to the Naval Base data set

Finally, are the residuals correlated?

Durbin-Watson d statistic (p. 415)

Range: 0 d 4
Uncorrelated: d is close to 2
Positively correlated: d is closer to zero
Negatively correlated: d is closer to 4.