# 2/1/2017

## Diagnostics and remedial measures

- Residuals
- Standardized residuals
- Checking model assumptions with residual plots
- Nonconstant variance
- Nonlinear relationship
- Dependence
- Outliers
- Normality (normal quantile plot) - use qqplot and qqline in R

- Tests for normality
- Correlation test for normality - based on expected value of ordered residuals
- Compute the expected value of the ordered residual (see p. 111)
- Find correlation coefficient between ordered residuals and their expected values.

- Use Shapiro-Wilk test, Kolmogorov test, or one of the other tests from norm.test

- Return to model for Toluca Company - toluca-Ch3.R
- Tests for constant variance
- Modified Levene Test (Brown-Forythe Test)
- Form 2 or more groups, based on the value of x
- Find the medians of the residuals for both groups
- Form the absolute deviations (from their respective median) of the residuals
- Use the pooled t-test to see if the absolute deviations differ, on average, for the two groups.

- Breusch-Pagan Test
- Assume that the natural log of the variance has a linear relationship with x (i.e., the variance increases or decreases with x)
- Regress the squared residuals against x
- Form the test statistic on p. 119

## In Class Exercise

## Please read Sections 3.7 - 3.11 for class on Wednesday.