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    Chapter 14 (14.5)

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    Jayde
    This document discusses confidence and prediction intervals. It explains that a confidence interval provides a range of values that is likely to contain the mean value of y, while a prediction interval provides a range that is likely to contain an individual y value. Both types of intervals employ a distance value measure that accounts for how far a given x-value is from the mean x-value, with larger distances resulting in wider intervals. Formulas are provided for calculating the confidence and prediction intervals, and examples are shown graphically modeling house prices.

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    Chapter 14 (14.5)

    Uploaded by

    Jayde
    19 views9 pages
    This document discusses confidence and prediction intervals. It explains that a confidence interval provides a range of values that is likely to contain the mean value of y, while a prediction interval provides a range that is likely to contain an individual y value. Both types of intervals employ a distance value measure that accounts for how far a given x-value is from the mean x-value, with larger distances resulting in wider intervals. Formulas are provided for calculating the confidence and prediction intervals, and examples are shown graphically modeling house prices.

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    This document discusses confidence and prediction intervals. It explains that a confidence interval provides a range of values that is likely to contain the mean value of y, while a prediction interval provides a range that is likely to contain an individual y value. Both types of intervals employ a distance value measure that accounts for how far a given x-value is from the mean x-value, with larger distances resulting in wider intervals. Formulas are provided for calculating the confidence and prediction intervals, and examples are shown graphically modeling house prices.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views9 pages

    Chapter 14 (14.5)

    Uploaded by

    Jayde
    This document discusses confidence and prediction intervals. It explains that a confidence interval provides a range of values that is likely to contain the mean value of y, while a prediction interval provides a range that is likely to contain an individual y value. Both types of intervals employ a distance value measure that accounts for how far a given x-value is from the mean x-value, with larger distances resulting in wider intervals. Formulas are provided for calculating the confidence and prediction intervals, and examples are shown graphically modeling house prices.

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    Chapter 14 (14.

    5): Confidence and Prediction Intervals

    Tanvir Quadir

    School of Mathematics and Statistics

    Tanvir Quadir STAT 2601: Business Statistics I 1/9


    14.5 Confidence and Prediction Intervals
    The point on the regression line corresponding to a particular value of
    x0 of the independent variable x, ŷ = b0 + b1 x0 , is deemed as the
    point estimate of the mean value of y and the point prediction
    of an individual value of y .
    We will assess the accuracy of ŷ as both a point estimate and a point
    prediction.
    We can do this by calculating a confidence interval for the mean value
    of y and a prediction interval for an individual value of y .
    Both the confidence interval for the mean value of y and the
    prediction interval for an individual value of y employ a quantity
    1 (x0 − x̄)2
    called the distance value d = + .
    n SSxx
    The distance value is a measure of the distance between the value x0
    of x and x̄. Notice that the further x0 is from x̄, the larger the
    distance value and hence wider the confider interval.
    Tanvir Quadir STAT 2601: Business Statistics I 2/9
    14.5 Confidence and Prediction Intervals

    Confidence Interval for the Predicted Mean Value of Y , µx given


    x = x0
    ŷ ± t α2 ,n−2 × SE (µ̂0 )
    s
    1 (x0 − x̄)2 √
    = ŷ ± t α2 ,n−2 × s + = ŷ ± t α2 ,n−2 × s distance
    n SSxx
    Prediction Interval for the Individual Value of Y given x = x0

    ŷ ± t α2 ,n−2 × SE (ŷ )
    s
    1 (x0 − x̄)2 √
    = ŷ ± t α2 ,n−2 × s 1+ + = ŷ ± t α2 ,n−2 × s 1 + distance
    n SSxx
    ( x)2
    X P
    where s is standard error of estimate and SSxx = x2 − .
    n

    Tanvir Quadir STAT 2601: Business Statistics I 3/9


    14.5 Confidence and Prediction Intervals

    Confidence Intervals (Graphically)

    Tanvir Quadir STAT 2601: Business Statistics I 4/9


    14.5 Confidence and Prediction Intervals

    Confidence Intervals: House Price Model

    Tanvir Quadir STAT 2601: Business Statistics I 5/9


    14.5 Confidence and Prediction Intervals

    Confidence Intervals: House Price Model (cont’d)

    Tanvir Quadir STAT 2601: Business Statistics I 6/9


    14.5 Confidence and Prediction Intervals

    Confidence Intervals: House Price Model (cont’d)

    Tanvir Quadir STAT 2601: Business Statistics I 7/9


    14.5 Confidence and Prediction Intervals

    Confidence Intervals: House Price Model (cont’d)

    Tanvir Quadir STAT 2601: Business Statistics I 8/9


    THANK YOU!

    Tanvir Quadir STAT 2601: Business Statistics I 9/9

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