Model Fit and Diagnostic Tests
Free SOA Exam SRM (Statistics for Risk Modeling) lesson in Linear Models. 27 min read, ~3,977 words.
OLS assumes LINE: Linearity, Independence, Normality of errors, Equal (constant) variance. Violations bias either the coefficients, the standard errors, or both. Residuals vs. fitted checks linearity and homoscedasticity; Q-Q plot checks normality; residuals vs. order or Durbin-Watson checks independence. One plot per assumption. Leverage is high; Cook's distance is influential...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Example 5
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 2d
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