Friday, August 26, 2011

Residual Plot

Residual (e) is the delta of observed value of dependent variable (y) and the estimated value (Y).

e = Y - y

Theoretically, sum of ( e ) should be close to 0 if the resudual of a regression model is normally distributed.

An appropriate regression model should have a random and normally distributed residual. We can check this condition with Residual Plot.

Example of Residual Plot

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