Quantitative Analysis for Management, 13/e

4.4 Assumptions of the Regression Model

If we can make certain assumptions about the errors in a regression model, we can perform statistical tests to determine if the model is useful. The following assumptions are made about the errors:

1. The errors are independent.

2. The errors are normally distributed.

3. The errors have a mean of zero.

4. The errors have a constant variance (regardless of the value of X).

In Action Using Regression as Part of Improvement Initiative at Trane/Ingersoll Rand

Trane U.S. Inc. is a brand of Ingersoll Rand and is a leader in both home and commercial air conditioning. In an effort to improve quality and efficiency, the company consolidated its manufacturing of evaporator and condenser coils into one location in South Carolina. ...