Tetng bre Genera Lindoe Hy potasts ° Meany hyookess abot reyveson coelkcents can ve ated using a liked approach. suppose thab tna null hypmmens of meet com be eosin Og | Hh TB so whet Ti mxp ond Bie Pxt metre (P=Kt) of Gnstomts Sach Mid only pal lee eguetins in B20 ore independent tre Full model is yexReu , Be Ox) WY : : ‘ SSECFm) = YY ~ Bis'y cop) deg reg of Lvetd em * ta redutdd model p Se 24th, 25 mn xXOe) matcx and v Sa De) xt wetey of voknuve Gelkeients « : Bo (2) 2 and Seramg, hot a SSE (Am) = Ty - §'2Y wk Un-pir) degees of Lresdemn + Yo ket, te B20) wt use Ihe delovence tm residaols sums ue squowes, 4. SSECRm)- BE CA) whet R= veduad made!» FR —Frademedel ishOe B= Gam of cquowes for he Hypohes s > Fe SA 4+ BEGINS » . we v@eel Wy: Bro af F 7A ©, oPExample 1 yA By Ax LBs pe “fet Uypalhenss 4, 8:8. Ho: TB-o whye T =Leto -'J also dimen sen gf Tinap el Box tan "Bem - Gx4) (uxt) efixt) heya Reduged model Ye a + Bx, + AX, ~ px tw = vellvced mode]: SW B = 6, . Ian o> Bot Ba (yt xy) 4 Baye He Ye Ye ¥ a +Y¥ye te ‘re U = Be Gane) X =8=B obs. Z=Xitkz, md =X. ce. a /, SEG) fatE : @ Exam ea ye Bt By + Bx, + Pars tu where He > B 2B, , Baz ® 22 Hence Tzmxp Pet ood m foi © *y Te; ou 1 8 Wy sco) weduced model is yz RB + Bx + ox # Bix tu- - B& +8 Gt) tu 3 = Xo +B 2, tu. whee ¥,=B% Bo amd 2% = Gites" Foz Sah se CEnd/ We TEL stodisses fox Re Gentyal meow Lg potass may be wrilMin os FB [rent SE CRY MC Geneably | Givee Hy (TBs e 5 But af tae columns om Xy axe orhoganaa! +o 12 lumns m Xay We Coen determine a sum of Squoy ce to X, mat is free ok any depdndence 09 X) fun MH numil eq uationl) 4 (Xx B = X'y we have Piyty : 4% rat ry [es wall al Le ZF wlumns of x Gre Berraganal fo Te aliawnns om Wy X'Xa 2XaX 0 win ike normal eyns — b2comne * sh XS. whey B= Gis yy B= Gly” Oss) Koke rat Ini Hast squat ostrnate of B (2) a BB? regindies of whaler w not — Yalx,) iF mh me Model , Peas foes, dita coleron experiment Gre dengned to have oi thoguaah vor abies Ne wniribubuns to ice oxplawned sum Z squonts of ayeqrtision tom ayo be dettemined wg Ihe enlvas sum of s4ntets netnod «Eyamdes SSR, yy %I DB Ihe feted venation Explomed hy XX a mode Gnd yg om Wn ASR CH) is He addiona) vom chien explained by YW when added 4 « mode! already lontouying Xa, SR C % Vahey, %) is The adden GU var ation eaplarned by fm Xy when added » & mode! ulpeady cent aging Ya and X,. Eyl Suen of Satins Gan also be emed om Fevms of SE Th reprdnit im few of RE Anat is explamed by tn added grep cf yonable ihut wos not Previ asly &plamed by ths rest Fraweple © show BX OY, Wy 2 ACG) + 6 Oy fy) 1552 Oofi,%) > Coosider He rode! : y: & +&x +B 4 Boy s € fe cn alysis of rd Onbly ty BT = BRO Xa) + BE (x, aX)” We may decompose 'Fe (3) frvet degree of Lreedamn RGrWor sum Of squdnes of Lofiorst BROW) = BRO 4 KR Oa/yd + GROG My Xa)” whtre —eath sun oF sq nots on tne right-hand ade has one degree of Ltedem «Arolysss of Vartan Table tik Detymberlun «of SOR (x, vay) 2 See ss deen f | esr - 77a || feta ag veseion | RO) 3 | MK Ge ri,%9) . ‘ Dea 40% - PRO): WSR Oy) Due te vany « BRA, AiR Lh) Due 4, we te alg Vy BR Cg hy, ma) ' | beet ; © RO py, %) RE Cy, Yay) | 0 Fobek ST nal, Cogliveent of Perkal Determination | WE con alge wonnder ik mvaunt ob Remaaning Yow ohon eppiasned hy @ viniahle give cther Lanai clready om Ke model This cy called Posriad, DeLey rnin o-Bs = al v Eyemmdle Viyy gg re B's ni Percent af ul ime telbever vanation oY Callen reqeessny om Yo told Xy ) tmed veplamed by Xr 5, 139 2 BE Ou, %) - SEO, va %) RE Ova 5X3) = $e Ox Ma) SSE Gna 1X3) Ds Gy Somble , SUPP etal sums of Sqninbs 8 [60 Gnd ¥; OD eons & , ob te remiming 4d, y%, thm Sxplaing oem of HE Mmauning 20, % eeplaons be ‘ o 2 = os Yeon alin “ee os \ Ray fia : by = hr aeBeta toelbeods Caren Seng) - ® la, ty obtain ReyrES Gry vosults urken el! venndd es Somekines is uselat howe been slomdandited - A versahle 15 Standard: 22d jy ke Samp! € by subosfreabry ob fs mean tnd dividing by Ge Slamdlond deui oeien Trig meoms that me Cumode tnt z-sere Ln Cray ven abe m Samo'e then we fp Ny E5160 Wing the 2 ~Seures Le 9p Be Bot Bor to tle 0% Gel] HS OL WOH on a) We average (yy, we We fact tak UG; have & aro semple aaewege God subsfract Lram C) we gat yg -9 + BOW) 4 A (Cones 0 eS PoOxie 3) ow eb Gy be We Sample Sfondand d@a'ation for 4,0 2421-9 Kin Ww Simple olgeiva gives » . ; BG) 1 BG 44 POY & x —=- vs &, Gj & . 7 Ok De 188, Ome), + EBC eu) Oy é é. Gy & Fi “b = st oS ih Each vanable hos been standavdiagd by repleting Kee Z- Swe tnd tris hes relied m new slope coelh cenls aoe by By 2 BA, tbh en teem - B; ce cated stand ardiaed W elpaants o peta boda en's - Ind at Gt maGsunngy Heels wot m beens of Ime angina! units of 9 oy le x7 Dub om Stondeyd devictien amity - Becunse jh rates ‘ae sce of REL Reg r@urs Irrelevant ft eqacchin pudy ret Oyplonatony vomabler on eyusd fookngs -When Ne regression Cy utedion has nly a Single plamodury ® vorable Xi, ty shandodined wefkaent i simply le samole crreloken bebe yo ond “iy whid> meems it must He befrrn te range -| fol ~ whelney we Be standowdsed ~ non shemdardined von able does not afiee} stobslical sign howe Hu fe sholssicg oe Ie Some m bob, coe:Muti COMA ARITY. ® Becouse mubmpe wegrtision oucdes more than one vegressovs WE may wory about veg ressiss being highly condored - Reyressers one said 40 be wthoyon dd 2 Ret 6 me bineca welakanship ameng Hem Unbox anitely 1a most EPP codicns hE regresscrs Gre NUt ormoyenal. Ighen Perk crt Newt —lineor depen din ngs among ' regress eG , Ihe prblem c& mult Collinge iS Said 40 Gigp, ot MWe oline cc frat cnt (4) Low maar Somes of ALwhc'Kneeen ty; \s The dada Gllection mtemed Om ployed « A+ Con shrasats on we model ox mm tu fpalution ©" 3. Modet — speech cation * 4. An meydekned modal - Wee dota osh ection meted — cum ge nse to mulkoohinganly Prob em when re om alysis Somples subspaces cL me regu of Me regres sors Lf we dota is collected gudh that fue exit ue neew -oey feet borelation we have te Pablern of mul coflingom'ty + Gooteasar on te moder wom popalirion being sampled Con Cas mul colyneoriby » For Qeanaple , sappse « researcher is Shad ying ine GH OR fomily Inne Om) and House sine On) on vesidual giectrictly cnsunpticn ine physical eanckeaint in He popalat un is thak , famibes nth higher Income, Geoeqully hare 1erge homer than faméies udth ‘ower Incomes. Must colin donthy wil! eyist regacdess ef camphng meinods + ~ choise at model Cum ‘ead fo Mus coPhinean My, Addkiny log X and fey X* oy ¥ amd X* to a model when X hasvery small range + ~ Owidekned modef has more regresars than obseruads ans + is? «medical ar behaorat These models, sume@tmnes Un countered i ™ yesearch, where tive inng be Orly & small oumber oF seibjects Cimmd!e anit) availaile amd Fomastun is uiecsed for a large aumber of regressor6. In eady Sublet , ie used approach to dealing in Ah muikeoliineows hy oo IS comet iF fo dep Sume of imu vonrables - Effects of Mode cohlingasty - Ihe Presence of mab colin Come by hos a couplé of poktnhaliy serious Hleets on He Weost - sauce BShimedes of tw wegrersico coelkacen t= Suppose tnese mee art M'y Two Reg uewor cand abhee x Gand Ya” ime mode} assuming tat x, ¥a amd B Pe ome Scaled bo omit 'enaye I he But Ars ta fom Ox) B = x'Y ye have po “14 fe] Lvs VL Be Sy - whet Yin is lim simple comeladion perween x md Xy and GY +S tee simple coyydlation bebween x} Gnd YF, ites a fo ~Sa C2 GT 2 pe 1G : a L ive Henn me : ~ Gh ty -%oy gd de Bo = Gy 7S ay 1-63. Va® TP here is S4tong murlh alintonn y velucen % Gnd ¥a 5 then Ihe cxveladtion Coeeadet ya well pe lowe lial — | Ver (By J = Gyo — + on CB; Gj > te ey depending on whetney G 1a D1 w=! Thertbee sfrony onal Kelli, beketen x amd xq results mm lange YEN Ome cand Covom oon C4 for Wee Gert ~ sq uowes eslimotors of te PeyeSOn cok coat - implies Thad diftetat sumpls fain at "ne sume x lee} could lead to uidely differtnt Anee Tis asbrncdors Gb ye anegel Pow Gmelerg - Whon ont mit thom +00 vorabiel, mulkeolineomY paduces similar othe Ty coun be shown that He diogened elements of te Le Ox 7 moka: Gis A ec » where RR te 2? from te regression oF XS oa The imecning Pr! wegrtnurs . IF eve os Strang mufrcolin ey belween xX} ond tray Subset of te tre Pu 1 yegressert top me vajue of 2 alk be Close 0 wmity- Sing ia veri ona of By ot. (1-23) sto (uf colton eeccily ionpli@s mat My Uden don. oP SL leash ~ So, ees BHinn ole o8 mie regrBsm or vow UB > ; wootknent By is very lange - While 'Ke mefrod of least squantt dll generally poduce Por Btimcdocs oF thy mac vidwed mode puwlwmeb ec when Sdrurymak callin eeerity ss prevent, this dees nok necessen'y im oly tak ® me fhed model is a Poor Redoctor . IF predictors at to eR ywos of ne X spo whos muir’ whine oe y holds apprwmartely, te Hed medol often powldes Ines foakne d the Seog facstocy pre dich unl fon otc Pe Cuuse The lingiw cembinetion % BX may oo “1 be Ghrrobed Guile vel Cuey though ba adiet ‘ duh he ond yd Poromebecs > WR ostim ted prorty Déogaostics et Mody collsnears y Exumingwicn of comeftionn bday : A ving imple measure of molk csbingonty is mipeotion of sey aft- dcayunad cements ¥ij m XK. TF regress ove Xj tnd xf owt nectly lineewly dependent « To IE WO be nener nity Ex amnining the Simple curralation’ Yj between nw regresgers is helpful wm deterhng Neer lingor depindindr behween pairs cf reysors only Unfoveanately, when move ton (9) twu regress ov ove muted mw neue -hiaeow depend en . Thee Ms no cgiremte That umy of im pairwise Lowelation usll be lange Vertue Inbrdion Fueters (VIB) Sm We Vorromce of tke jin regression coefbecent is Gp ot 2 CV-RE) 0% we con vidw Uy aa Te ft Cor by which lhe vanonCe of 8 % mere ase dust Lo Meer = ingore dependtnd amung Ae regres - We coll VIFF = G = Yep sie vaegtonts wbleation Lactex Denrdirad Cypeneate mad crtesmat Fo ony VIF ekaeds So jo. This an ind’cedian that the ® ASC Citvhe) re Groen W-Oatnt mt poorly estrected due te mfr cohineonrity . Elgen System Analy: The Ghoyacteris HG vous oF gigtn values of Xx Say LR AP Gn be used 40 measure type extent of mulkebingawity mm He dada - It Tree Gye one ww more neo linea depénden@ in he dala ten ont Ov move OF ine chowacteristics routs ait) be small Other DiagaushG : The detouminoend Oh can be used 69 com index of mudk Gllineanly . Th xe mofer Sin comdlation form, Ihe pasible range of values of tre deberminaat is OgIx'el SF Tf fxxlet, He regressor® ave odhogenal while sb (X'x! 20) diee is am -Qeact linear dependence wmong TRE regre ssoys » Wile THs measure df ctlin@oml is easy to apply , if does aot provide amy mformubion on te sour of mlb alineanty lhe signs ond magnitude of Ha regression coofficants well sometimes provide an indécorion frat mulbaallingamby is present: Th adding cy removing 4 vegressor produces lenge changes m Me OsHimet® ch te regression comhcents mafneatline only 1S maicabed Finally oP @ wolfe ent hawe weong Signs 5 mulfvollineowhs wuld be Present -4 ; ® Niethods ct dealing vath Malh clingartty 2 Ie Gfheeting addihenal dota. ime addibonal dato should be collected jn & manner designed fo breakup Ie mulNeolingowity ia Me aiskny Taba Unfartumabely, colle ching addetional deka may net always be Pessibig due to ewnomic conthraints oy beLawe he pros studied 16 ne longer available for Scmmpliag is nef a teebhe WYable soliton bang Glleeting addch onal dda bo IRL mulhcollin@ Gah} pwblen vohen the mud collineewoty Problem is dua to lonstraast cn the model or tn Ike pupal aben * 2 Moiel Ro-spebeadion Respecthcapan of ia regression equction Tog Cer Ihe mmmpaet of mufh llingerity One apprach fe mul bcolhineraty IS to veda the egressoys . Foy exemple, FX yXa,Xy ore reurly dependent, £ may be possible to bnd some fomchon such cs Ke ka Mike ay . % Xe Kye Ke Xa 7 that presey ver te mhy medion ih he? origioud Kegressor’ bot yeduces i condi hdwting « Anotery widely used approach of mode! respecr h'Codht on iS vomable Climmadion IF x, Xa, Gnd X3 Ge lineanly dependent, eliminah ang Gye Ryresr SOY Xs, may help combab mujh wliineosmhy we dvap Venables trod fue tos Cxplenakien power However, variable deppiag, may co A guy Like 7 2) fam WE model has Vgnrhcant eo planets re Bowel crawl Me icc. repute J. Mode! Adegnaoy Checking i Te min oumptiens usually made in modtiple vegression cal ys Owe 5 1 The relahonshrp betuean Te responses omd tre bg yesuys ig lio ee atte ost approximately - Qe Ihe 2avey teem a hes Cy mean3. Ihe Ory form Gs Conchomt vawridmnct @ Me ike Gyvevs owe un covvialed - She ovvove «we NMBJIY distnbuled - iNdi «ust wp We showd always nsidey me validity Of frase wWrumPton te be doubtful omd conduct analyses to examine the adequacy of 4a model- Gross Violations of tH OBS cumptions mary Yield en unstable model ip Ike sense thak a doltient sample wuld Jead to a tobally de fered medel wits opposite condustens. Seveval methods usehal for chedehy vidlahions of the baste regression assumptions oat pamowly based im shady of te mode! resduale- Bey-§g iS wonveniant to tok of tre vesiduals cas Ine veared w observed vaSues ob Me ewors . Thus omy depowtaye feo He asummphion on Me @rvort Showd chew up in the r@siduale. Somabnnts , it helps w we scaled residants. Different fms oF Residuals * |) Somdowdired residucds, Sin me appwximare an erege variant of a vesidual is by mSE = Za nk~! a logical scoling ob te vesidaa! would be doe WY, fea c-eon Stomdowdi red dah eae mam ayo cmd wnt vow ule - Hentt a long shomdondiaed vocdual (di d3)oolentially ndicaky an outlier:Studenrifed Rardual > using MSE as the Vow Oma of Re ihe veridual wy S$ only am uppreximation . We can wnprove ike residual scalmg by dividing &; by Ine ence} ¢famdeurd dewation of the sth veydual Rood! woz y -G zy = xo tx'y eft. xox het Jy >i) wot [Lew ]y . He XG IE ste Ha mele x Pur Y= YB +R me 0G" Us [i-4] Opa) BoB + Cla) = XB - xO KB + CHM = xB - xB + (f-H)w = ([-4a ibs (]-#) a, vv Gi) 2 ver (Ci -Ha] = LEW) var Co) Cow)! - O'Ci-4)T-H ay Symmetne and ndew Jost Uke he je mabnw I-H ss gtmevdly not dfagenal , so fa residuals hawe diflerend venanas and awe crvdlafed ven Gs) < O* (I-hii) whew hi 3S 1 SIR dag onal element Of tk» hat malnx H. Sa os hist Wang Ihe vendual mean sqnove CSE? fo Olinale 1m Vining ot ame weduals actually wer eshimates Yew (us) re . ——— rye a, 0 VewOr’) eb {nse G- lei) In mang Situations, Ht van ame ob tne venducls Sable, Data pow hewarly for loge, Seks In Hose cuses, thee may be ulte dofferemas betucer ih shandardvacd and studentined residuals. Thus — Stundewrdaed tnd jtudunbaed vesduals often Gonvey aq wivaleat mdormivtl on . However, Sina amy point with w lege eeducd amdalerge — hij is polenbally highly mfluential , on te task squores ft, Seamination of tht studeahaed residuals Ts gon away recommended - m simple regression ith isNokh thot when he obseveution x © dese to |e mid poms of 1 x data » 4 -% wt be imal amd Ihe timated Mandard deviahon of us CHL denominuby of x alll be lage cwnversely , when x i neay ite Oxeme Onds of Ike vange of x data, xp -¥ wall be large , and Ime estincted stomdowd deviation of ut; will be Small. Also 5 when 1 sample sre nlf reolly loge , ike oect ot Cx 3)” dll be relatvely small, So rm big data sets stud enbred eerduals may not defer a dvcwn ah cally Grime Stand agired renducdls - Pass Res duuls : ie Standardiatd amd studenhaed residuals ot oftective wm dedduking oiersS. Anomer approach “te making residuals sell om finding oles is fy examine Th quanhty that computed from Yo -8.. whit Gey 3 Ie Hed value vt a ine shh vtpense — based — om all obser vohims Qe @pt me PH me A Ug 2 W7 Yay ie dew behind this & that sf the ih obserucdion Yy jy really um usual , re wegresSon model based on all obser uahins may be ovevly wiHusnad by this observation. [his could podia a Allied value Ur that ts very similaw fo the obsewvedR-Stedet ib Gb Castemary use MSE as an ©shmate FP Onn compu Beg Ios ts calfed in Rkined Sealing Aniliey Approach usoyld fe. te Us an estimate F 5” based ona duty set WS tke CK ohtervaton removed: Sig = rpliase — WE [Cr-ha) n- pol Sis ug) tastad MSE te predate an erternally Student Fed residual calfe) R- trent tee ra [sis C- bn) Residual plats: Graphical ane very effectlt say Ao Tn vestiga Fi % & Fesression model and P lysis 9 residuals (6 IG. adegunty GI heck It underlying asSumny Ben ¢ fe Small departures frsm IKE mormality — Normal pbs ily pl ASsump Fons do nut «fleck NE model greety, buf gress hon nav malty is pokatally mare Sevisns as ta Ee F stutishs Gnd Con kena and predicton in tevva ks depend on Ke nov malty asS un pan - Fhe nernal pred ty plat & Signed S> hat diz Cunnalefve novmal dicdibu hon win plik as a Shaight Aine» Substrake ght Line indicate that Ie. clisbibution Ae pru-tures tum 4 Stvai é tery be I externally is nie Novimad- Lek tay * ty 4°valus yo , amd wnsequently, lit wdinary residual Gj wall be small . Warefoce st wl be howd 40 detect Ine outliers Citse pre dection overs ane called Press ysidealsJ Howeor , f ine ith obsevveen iy def deleted, tun 54 conr gt be mflutnad by that observation , So tre vey al hing reedual shold be key to mdicote uk ey « RL presen of ike Vow (ifs) + Vow! | hi > | Ce q-h Pht GQ -hay 2 0 1- bi So I Stondowd ned PRESS Residual is Ue . pees “ni i {vex Gly) . Lomi. hii) oU-hi)Stud oti fed rescdudls ranked wr Ores Sing ovdbay if we Plt dey agains! WU commu la tue pobaly lity 7a Le )In (ETN ne vesulhng Pink Should Lie vas Haight tine 4 pproxinately. L Plit of revduale hme Sywente: Helps to check constant Vivian Ce» If Ue Hime Setuene 1. which (CR data weve callected ig Menon, IF is 4 ged jeg, + Phd (Re veSduale against Hime orden Time S4urnte fled 9 residual may indraate that Ie evrars af one 4me peviad are Gwe kd wk Uitte at sik tae pevinds . ‘De. Canela kon between moAel evra ab differed Baw ptvicd ts called gut ane bm.Stok on Residuals: a be we oy apply stotiskeal bats fe te residuals to obtain yuamtitahve os thy mode! uddquades — Ibe PREW Saristicn # measur s Co Gt are ach bHahsitG n - a 72, pres + 2 [wi z 2 ( =.) BI teh : f j Nh ax wan + j Pres is generally ry oxded Gs how Well GR regret oy mad el wl per foun ma Predicling mem doba « Ty models with smal) vw oes We PRES is clesired Detedicn and Tubréni ob Outen An cuter is on @treme obsewation , one that is considey ably Atereet fom ry majotty of me vedio Reidusls that at tn siderably Ju IN Gey in absolde vault trem ite olts . Say 3 to 4 stamdewd dewiahins Lromm Ht mien indicate —poinbal y space owlserg. Nepending oo ther loc ods on in X sous» outtiars com howe modevete ty sere effects GA Ike veyeBhron models Resdaal Pale agains Jp ond oe namal peobobility plots o helpfe in denk Gong oubisee — SemeiaS — entlieet — ont “Bad ‘yalus clung ol creat of umudual but @Xpavoab'E Cveries EXdmnd'es wdude faulry mecsuntm iat ox analyses josunech Cwrding cb datw td faite of & measuring indhamn et > [f WS A KL GE Thin oublidy shuld be lorvteled on deleted Jeum the dala sth . Os eording bad valu is dsicabié becuse lost gquoots pulls tre filed Qanedion Lowend He untliert os ihominemi res tre residual sum of Saqucets . How &r es batt Should be Steen pon -otukctica evidence . that the odiiew bow® bad valu —befwe Lis daycowded » Somebots we Find that ike pater vy on wousnal but pertertiy plautible observed ans * Deighing Ike Com be dangerous - Oaossonaliy , wt find mab He omtldey fy mre im pert ant foam ine v4 of Ite doba because it may conhal many Key model Proporta + = Outliers may pont onf madequades nm the mode such ailuve ty fit the daha well m & covtary region of x spate i Fre outlde, is & Point of porticulawly dos rable reponse (2y; low cost , high yield) Knowledge of ine wegversov vault when thal reponse war observed may be tvemdy valuable. Idenbheahm ond fella up analysis on owlses obter result im Prowss Impovemont or new Knowledge bondrning facdas whose eed On Ihe response was previously enknown- The Met of oblies on ie regression model may oe ably checked by dypping mae pio and re iting (FL regression equation W2 mag find inat Ime gublcors i.e weet ants cy me Summary Stakstics such o a RL, und iw residual meons canoe may be very sonshye ’ Jie EVES Om Felqhonshif fo aw outlies, We would want to be embedded m ail of fe observohons amd not mevely an artifice of a few prrats- We cam also get moe ah seyvahtios neay ike outh er. In addokun +o [Re s@veva) methods of deflecting outliers , we con d& v2 Coold’s dostana measurebh. 2G -to) (K+ S* ce ealanaled ob mean Suse #11 5 = vegdinen timate of Ey: /x) > bop = EH RIG On OSlimate of E ty; wh ine ath dala Paint removed Th idenkly Potenbal outlies ,a yWe of thumb Sto fret | 8 on outlier when, Dy n - Cel) Ingdequade ~ Trowsferm chung amd ui ghtngto Gortet apie! ir feats Hee, we frau on methods and pradures fr bul lding rey rision models wher soma oP Me afSumnOtions ont violated hab assumptions of constomt yom aCe uncorrelated rors, avemallgy of Orv ors * ong Stabs hy. Wher IRL aSsumPon of — Wostant van'unce is veolabed , Vanna Stabitotyss Womcformodions at done + For example of y 8 Pissoo tamdac Vowuble oi a Sénple impay rgr8ion modéd, fen te vewans Fy i equal to he monn. Since , The meon of y iS reloted tythe regr@sor ubaable x, fo X& We could, regress cans x fn We Vann Square (ort of a fo prs es B. ai ene of finde pendoy! of tha ha, moms Lf fe espn varqable vs a prepuchon (0 $ G41) amd ine plot oh the residuals against 4; has an, Ihe ox Sin beans formation — y's sin Cl) ine double -bow padion Ika vasrioma Fy wall be popakional © xe aopeope abe [domain of anesin is -1 40 11, Ci tm be om id Somedimas we Can use prey experten@ oF reurtdic ad wns devi tod to guide win selecting Gon appropriate Yecuns fxm os on Uselwl Veer onde Stab fying Transl omar - Tromefoma on * Relatindhie of I Yom b yam On Go Gt EW) | ——— - Ro M ab & ? e corbtant | ° neennen a fomp Y'=L5 © CPasisen dated * 8. Oy Eby [1 - Ew] 9's Sm GEG) binomial _ Proportion * E ° i I . 4.0 & fe] y= Ingp Clos) : : Ht So s 0% [Eoy*J g! 249 neelproce! = ‘ =e Squame rout: & os Ceqd” yl = 7! sebecoovce. reaprocad> mpottamt 4o detect ond avert a nun-wnstont Orvot Variona «Tf this problem ts SBhmutes wll shil be I is not him nated , Me 1€us+ squdves unbiased but IY wll ny lonyor howe fre minimus vartoma pre povly . Tee eftect of tvamt form oom is woudly do gin mort prease —ebhmates ot Ie model Pax Oven eters ondin ceased sonsfeuily for HO Shab tial 4eats ® Show Graphs. Troms fam abions +0 lineorhp lie model - Som atin es Pror — Mxpen end yy Iheorehcal wnsidevah ons may md“cadt that He relation chip better y amd ‘ie egrets is not Kne or - In most cabes ar non-linear function cam be lineonfed by wstas te Sudfobie tromstom Gdton- Sah nune!Imeere models owe called Intainstcally oy framsform ably into AL am Ox omple * ye pobu ov infrinscally —Imeor smc st Con be dronslirmed 40 & Stracght line by fodking — log g = Bo, Ry ings In (Re uw)» Iny = In Be tine + [In we lay : hi + Bx Ine +inu- Ing = In B+ Bx + ine frat oy’ =z BE Ax tu! Bie InP.» and w'zin wh are ylelny When tramsfumudions of tris narkunt ont dom @ ) 1 estimator has jeast~S4uaves lees4- squew4, properbe wh upeck to 1m trintfaomed data , nob he um ginal data”@ Lineottoble — fumcbiins nd Coreespunding — Lino 74m i-furm brant * Fun Gant Trsomns Fert GebiMn ° Ys Pax? logy = log Be + B, ing x 2 ys g, ee logy = log + Bx 3 ye x 1 4 “| 8) a 28, ogy = logx og (Ax 8) | op pe, BeBe | dD |: Ph 2B BU Anolyk cal Method for selecng a frunsfoanadi on The Bor - tox Suppose frat we wish 4o from Storm y te cored on — ovimaihy amd er nun~ conshamt vaedamcr- A welul clas of from s feemet.’ oo Is - Padehtweben Hy thi Vie pow lt eomefurmadion Y> sheen 'S @ porcmoter Jo be debenmned Ceg Ash meoms fy). ime Porowmeterc of 1m model umd 4 cam be oshimaded ukng MLE: The MLE of & Ie volue ob r for which SEQ) is minimum « in thinking about Im power transformation yo deffieulhy ew'ses when rz 0 Tot is as x approach es 0,9" approaches amily - ints is a problem cna st is meamingless 40 have oll of Int eesponte vols eyucl to a constants Ce approach to solving ins dotivadty 3 ty wee[ Ging » deo whoe gz In“! | ty Zlnyz] and ft ime model gre x8 tH by OLS oo ARLE. fhe valut of x wsuudly dejecmned by fing a model to y> for cowlous vadats of x, ploting the vesducl sum of ini mires Sq uones versus A and then veoding Ine value of Dd That minim SSE OX) from Ihe graph: Generalined ond Wecyhted feast Squares © “The wSSumPd rons — USually made — Concerning Ike lene od peg r@85G00 made] yoxB pu rut Elz. ond Yor MUIeO*D, sometimes > inese assumptions om unreasonable - Fay Geol, As one’s meme mereoses , Int vamabriity of food ConSumPhion rll movease. A Pooreye PeSun will spend ce rabner cunctcend amownt by always buying cheaper ford - A aish Pevsun all occassionally bay va expensive fol | buy epea sve food s Inase wih high mont ok ota Ht and cer variability ¢ food tonsumption fo we will display o gre consider what modohrabons +0 [nese m IKE oLS pactdurt now txt neCASary When VarlW) = OV, Where Vis a known mn madiwx fF Vu dougowal bub wits umegsal déagoaale element fren Ine observations yo ove unwryelakd but have uo eg ed vewriane wile SF some of Ihe ob -deagonal elements of V Gxt non = 20, Then fhe observations ot wwelated:feb yg exB bu, Ela) 20, vavlu) 2 OW ThE OLS Vtimatoy ® Br yeloty Be Cxx)!x'Y ts ne -langen appropriate . we solve th problen bet of — abseruadion S thak by Wansfoaning the model to a new ols Saksty fu Standard feast square — Assumptions Men wre jee Koms farmed data” covantand: makrix of [Ru errors, fur Srna OV Ie metyix KK, wh oe exist on mxn pon Simgulay Symnedn © KK 2 Kk zV NW tm Goh ix square root of v usually 0? fe ds ofltwr called tH fn2 OBSumod sbrectrts in whch case Vy repeti-Qnts wn nown Gnd vO Gnas Gmdng He random Orr oWs of ite vanan Gs aport — frm constant Dokne Ib ney vanables Z=ky, Bek "x, geK ue So thot ye XB 4u — becomer kp piclu BP +3: EG 2 kK ' Eu), © Ver (qr = 2 C5- Eup J[5- €q27'd. ky ZEGg9) 2 EF Celuu'e!) 2 kK ECuu') et 2 Oe VE! ote ae ge 2 &] Thus tre Qemonts Pg hae mean eo amd Comstord varianG and ore untwryelated . the leu: cquores function if MB) = 99 5 uv tu = Cy-xgy' ve! Cy -xp2 Hue feask Squares normal e4uUahon oye- (stv )P e x'vily ‘ é. Cxlvy yt x'y ty Bae called te — gonoralrad leash -Squawes Htimarion of B ECB)» >= 6 Vow (p> z o*( BB)" 2 oO Odv-ly) 4 he 4SSum phew 2f Constand variance of Woe erry forms ‘ called Home sceckshtidy, while nea —cwisoat yarian te & Called Hefers Sad, Bolg :Weighted Leask Squow es: Wher the tvro’s wu ae uncovelated bub howe un eqpnal VorionGs So that thy cvawcunte matnx of W IY o 7 * us ] ~) tw Ove: O My | 6 Te esti akvon proudure usually called weighted least squerre - Ib wey! Sm@ Vis a dSagonal ude demtntt OF weeghts — Wy, Wa, . Wm The weighted east ~ Sqnter & Mermal Ry WOriont — iC 4 (x'wx) B= x'w s “ Bo. Otwxy x'wy Agle that cbsevvadionr wih lage vom an@ udll hat Smoll@¢ wegnts thom observation’ Wwhh small Vari Gon C8 * Hf Cyareny 2 07v) wth VEL and Ors 1s ated > omy reslhhs Wt most ov Boz Ges) xy 4 SKU unbrased: Hower ey I ofS Oshimorar 15 ne longer Mrintmwen Von an Ge Ot mator-Tet fev He temsxadasrooy Kem ye Bet By et Behe FU hee $e 4 bp + Sava bee + bade t erver' <0" Hid = das oe bee fegr@s squoned residuals on al explo artery Vem — pun d $256 whefndy AS re grEHen has explamotay* Foz Re /« C1- Rie )p-wel a large tet stabshe s evidend agamnst te null. the Jongvonge — Muto ler CLI) verGon of tute fest 3 called * BREuste# faYan TEST fey 4eberoskedasticy: im 2 ah» vw Ke White test : to example sf ye Rt Bm t Bove + Boxy tue Regeess Squened etseduds on all eplamcrtory venriables , Key sqnon®s ond mierackoos- Be bed Um tSaMa t dees + Wt WM” EM Shee L do. + Xn Xr + oweHoo: d= da = a re @® Lm: 4 Rie ow xv. Examples, Savings, = 8 +4 Ing: 4 ur * oh verity) = Oly G: [ Retere scedusticity is lemon upto a ery : iy Ot Ings In come aw Saungsy = Somings « Sota, aiding treouh by ling Sav? . Ning {Ing Ting re Sove* 2 BS + Brag 4” H ence E Wait) > ECBSy + El pring) + EM)” but EG). o£ u lnc » ECW.) ol gw 20 Sredusin 2 y EG) el o ie; 0 \omo a Inti