• Card 133 / 180: The figure below shows a plot of the residuals from a linear regression. Notice the two residuals marked A and B. Which of the following below best describes what these residuals reveal about the fitted regression line?
    A) Residuals A and B represent positive outliers in the sample, which results in the slope being over-estimated (it is larger than the true relationship between x and y).
    B) Residuals A and B represent negative outliers in the sample, which results in the slope being under-estimated (it is smaller than the true relationship between x and y).
    C) Residuals A and B represent outliers in the sample, which results in the line of best fit.
    D) Residuals A and B represent observations in the sample, which results in the line of best fit.

    Answer:
    A) Residuals A and B represent positive outliers in the sample, which results in the slope being over-estimated (it is larger than the true relationship between x and y).

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Business Statistics

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Attribution:  David T. Bourgeois, PhD; Bharatendra K. Rai, PhD. Business Statistics. The Saylor Academy 2014, http://www.saylor.org/courses/bus204/
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