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August 2, 2013
Prediction intervals.
Sxy
Sxx
Fundamental identity:
SStotal = SSreg + SSres
Regression sum of squares (variation explained by the fit)
SSreg =
n
X
(
yi y )2 .
i=1
n
X
i=1
(yi yi )2 .
b
1 .
/ Sxx
b12 Sxx
b12 Sxx
SSreg /1
SSres /(n 2)
n
X
i=1
n
X
i=1
n
X
i=1
=
=
n
X
(
yi y )2
(b0 + b1 xi y )2
(
y b1 x + b1 xi y )2
b12 (xi x)2
i=1
b12 Sxx .
So
F =
SSreg /1
SSres /(n 2)
Source
Sum of
Squares
Degrees
of
freedom
Mean
Square
Regression
SSreg
MSreg
/
2
Residual
SSres
n2
MSreg =
SSreg /1
MSres =
SSres
2
(n2) =
Total
SStotal
n1
NOTE: the t-test allows for testing both two-side and one-sided
alternative hypothesis, where as the ANOVA F-test is restricted to
testing against the two-sided alternative.
.
b1 t/2;n2 , b1 + t/2;n2
Sxx
Sxx
95% confidence interval for 1 :
9.27
9.27
, 1.60 + 2.002
1.60 2.002
= (1.04, 2.16),
1117.90
1117.90
which doesnt contain 1
A value of 1 for the slope does not seem plausible based on
the data.
=
= 2.16.
/ Sxx
9.27/ 1117.90
So if T t58 , the p-value for the test is
p = Pr (|T | 2.16)
= 2Pr (T 2.16)
= 0.0349
Aim: Simple linear regression model for risk with asset size as
predictor.
E(
y (x0 )) = E(b0 + b1 x0 ) = 0 + 1 x0 .
x )2
Var(
y (x0 )) = 2 n1 + (x0S
xx
Var(
y (x0 )) = Var (b0 + b1 x0 )
= Var (b0 ) + x02 Var (b1 ) + 2x0 Cov (b0 , b1 )
2
2
x2
x
2 1
2
=
+
+ x0
2x0
n Sxx
Sxx
Sxx
2
1 (x0 x)
+
.
= 2
n
Sxx
(1)
N(0, 1).
As in previous lectures
(n 2)
2
2n2
2
independently of y (x0 ) (since y (x0 ) is a linear combination of b0 ,
b1 both independent of
2 ).
y (x0 ) 0 1 x0
q
tn2 .
x )2
n1 + (x0S
xx
(x
)
x
0
0
1 0
q
t/2,n2
Pr t/2,n2
(x0
x )2
1
n + Sxx
=1
1 (x0 x)2
+
n
Sxx