44866457.xls, p.

Residuals and the Normal Probability Distribution

Hypothesis tests in Regression Analysis assume that the residuals have the normal
probability distribution. The same assumption is required for the Student's t test and
the F-test in other applications.
Two visual methods for testing this assumption are to examine a Histogram
(should be bell-shaped) and a Normal Probability Plot (should be a "straight line").
However, both of these graphs must be expected to deviate from their ideal shapes
because of sampling error.
This workbook will help you learn how these graphs look when the Normality
Assumption is satisfied, and also when it is not satisfied. For comparison, graphs of
samples from both normal and non-normal distributions are shown.
Seeing departures from normality is relatively easy if the sample size is several
hundred, but can be very difficult for small samples.

Fortunately, small departures from Normality do not have much effect on the
validity of hypothesis tests about the mean of a distribution, including both the F-test
and the t-tests used in regression analysis. Therefore, do not be discouraged at the
inadequacy of these visual analyses. In most cases, unless you see a gross
departure from normality, your hypothesis tests are valid.
To practice with Histgrams and Normal Probability Plots for residuals, click on the
Graphs tab at the bottom of this sheet, or
click here to begin.
 44866457.xls, p. 2

Histogram Normal Probability Plot

3
0.3 ← These two graphs display
2 random samples from a
population that has the Normal
1 Probability Distribution

Normal Scores
0.2
0
New Sample
0.1 -1

-2 Change Sample
0 Size
-2 -1 0 1 2 more -3
-2.5 -1.5 -0.5 0.5 1.5 2.5 -3 -2 -1 0 1 2 3
Standardized Residuals Standardized Residuals

Histogram Normal Probability Plot ← These two graphs display

3 random samples from a
0.3 population that has the
2 Exponential Distribution

1
Normal Scores

0.2
Exponential
0 Distribution
0.1 -1
Uniform Distribution
-2
0
-2 -1 0 1 2 more -3
Lognormal
-2.5 -1.5 -0.5 0.5 1.5 2.5 -3 -2 -1 0 1 2 3 Distribution
Standardized Residuals Standardized Residuals
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