Stat 112 Lecture 17 Notes.ppt

Stat 112: Lecture 17 Notes Chapter 6.8: Assessing the Assumption that the Disturbances are Independent Chapter 7.1: Using and Interpreting Indicator Variables. Time Series Data and Autocorrelation When Y is a variable collected for the same entity (person, state, country) over time, we call the data time series data. For time series data, we need to consider the independence assumption for the simple and multiple regression model. Independence Assumption: The residuals are independent of one another. This means that if the residual is positive this year, it needs to be equally likely for the residuals to be positive or negative next year, i.e., there is no autocorrelation. Positive autocorrelation: Positive residuals are more likely to be followed by positive residuals than by negative residuals. Negative autocorrelation: Positive residuals are more likely to be followed by negative residuals than by positive residuals. Ski Ticket Sales Christmas Week is a critical period for most ski resorts. A ski resort in Vermont wanted to determine the effect that weather had on its sale of lift tickets during Christmas week. Data from past 20 years. Yi= lift tickets during Christmas week in year i Xi1=snowfall during Christmas week in year i Xi2= average temperature during Christmas week in year i. Data in skitickets.JMP Durbin-Watson Test of Independence The Durbin-Watson test is a test of whether the residuals are independent. The null hypothesis is that the residuals are independent and the alternative hypothesis is that the residuals are not independent (either positively or negatively) autocorrelated. The test works by computing the correlation of consecutive residuals. To compute Durbin-Watson test in JMP, after Fit Model, click the red triangle next to Response, click Row Diagnostics and click Durbin-Watson Test. Then click red triangle next to Durbin-Watson to get p-value. For ski ticket data, p-valu