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September 13, 2007
Assumptions
Several important assumptions are needed to justify regression analysis.
We will work with data transformed to deviations from means. This has the effect of suppressing the constant term.
We now derive a fundamental equation that explains a lot about how regressions work.
Accidental arrangements of the error terms (relative to X) cause the estimated slope to deviate from the true value.
The variance of the estimate (previous graphic) is also important. Here is a derivation.
We are in a position to explain the motivation for the following assumptions:
Posted by bparke at September 13, 2007 09:35 PM