Essential Statistics, Regression, and Econometrics

CHAPTER 9

The Art of Regression Analysis

Chapter Outline

9.1 Regression Pitfalls

Significant Is Not Necessarily Substantial

Correlation Is Not Causation

Detrending Time Series Data

Incautious Extrapolation

Regression Toward the Mean

The Real Dogs of the Dow

9.2 Regression Diagnostics (Optional)

Looking for Outliers

Checking the Standard Deviation

Independent Error Terms

Exercises

There are few statistical facts more interesting than regression to the mean for two reasons. First, people encounter it almost every day of their lives. Second, almost nobody understands it.

—Anonymous journal referee

Regression models are estimated by using software to calculate the least squares estimates, t values, P values, and R². But there is more to good regression ...