Module 2: Basics of regression analysis
(The attached PDF file has better formatting.)
Homework Assignment: attributes of classical regression analysis
Claim severity and speed
Suppose a regression of Y = the logarithm of claim severity on X = the speed of the car satisfies the five attributes of classical regression analysis on pages 15-17. Explain whether of regression of Yʹ = claim severity on X = the speed of the car satisfies each attribute.
Jacob: What is this homework assignment asking?
Rachel: Yʹ = eY. If the conditional distribution of Y, given X, is symmetric, is the conditional distribution of Yʹ, given X, symmetric or skewed? Answer this question for each of the five attributes on page 15-17:
symmetric vs skewed
single mode vs multiple modes
normal vs heavy tailed
equal vs unequal spread
linear vs non-linear
For four of these five attributes, the relation assumed in classical regression analysis does not hold for Yʹ if it holds for Y.
Jacob: Are the five attributes explicitly listed?
Rachel: The five attributes are implicit in Fox’s discussion: symmetric, unimodal, normal distribution, constant variance, and linear relation.