Prediction and Confidence Intervals

Free SOA Exam SRM (Statistics for Risk Modeling) lesson in Linear Models. 22 min read, ~3,345 words.

A confidence interval bands the mean response; a prediction interval bands a single new. The PI is always wider. The same point estimate serves both intervals; only the standard error (uncertainty) differs. The PI standard error carries an extra "+1" inside the radical for irreducible noise. As the CI collapses...