Prediction: Linear model (Visualization)
- Trusti = b0 + b1Victimi + b1Educationi + \(\epsilon\)i (Wikipedia)
- Straight line of equation above is not exact model of the data
- Admissible model must be consistent with all the data points
- Line only cannot be model, unless it exactly fits all the data points
- The error term, \(\epsilon\)i, must be included in the model, so that it is consistent with all data points
- Statistical inference:
- Assume some probability distributions for the \(\epsilon\)i, e.g. i.i.d. Normal, with zero mean
- Model has 3 parameters: b0, b1, b2
- Prediction accuracy: How well does our model predict (training & test) observations?