12.9 The Prediction of a Particular Value of Y given X
We now turn to the task of predicting a specific Y value from a given level of X. In particular, for X = Xo, let us predict or forecast the value of the random variable Yo = β0 + β1Xo + εo. If the true population regression line were known, the predictor of Yo would be E(Yo|Xo)= β0 + β1Xo, a point on the population regression line corresponding to Xo. Since E(Yo|Xo) is unknown, and must be estimated from sample data, let us use the estimator , a point on the sample regression line. If is used to estimate Yo, then the forecast error is the random variable its mean is that is, is an unbiased estimator for Yo since . Moreover, it can be demonstrated that the estimated standard deviation of the forecast error is
If we next assume ...
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