Hypothesis Tests in Simple Linear Regression

• This approach helps to assess the adequacy of a linear regression model and model
parameters
• Facilitate the construction of confidence intervals.

To test hypotheses about the slope and intercept of the regression model me make
following assumption

Errors (residuals) are normally and independently distributed with mean zero and
variance σ2, abbreviated NID (0, σ2 ).
What is α
 Important and special hypotheses

When NULL hypothesis is true, it is equivalent to concluding that there is no linear

relationship between x and Y as shown in Figure above.
This may imply either that x is of little value in explaining the variation in Y and that the best
estimator of Y for any x is yˆ = Y

When NULL hypothesis is true it may also imply that the true relationship
between x and Y is not linear as seen below
When NULL hypothesis is False (Rejected), this implies that x is of value in explaining the
variability in Y and the straight-line model is adequate (as seen in Figure above)

It could also mean that although there is a linear effect of x, better results could be
obtained with the addition of higher order polynomial terms in x [see Fig. below].
 Test the NULL hypothesis that slope is ZERO

we will use α  0.01. We have

SS E  21.25
the t-statistic becomes

SS E 21.25
 
2
  1.18
n2 18
 ANALYSIS OF VARIANCE (ANOVA)
APPROACH TO TEST SIGNIFICANCE OF REGRESSION

ANOVA approach works as under:

Partition the total variability in the response variable into meaningful
components as the basis for the test. The analysis of variance identity is as
follows:
ANOVA TABLE
 𝐹𝑟𝑜𝑚 𝐹 − 𝑇𝑎𝑏𝑙𝑒, 𝑓0.01,1,18 = 8.29

𝑆𝑖𝑛𝑐𝑒 𝐹 = 128.86 > 𝑓0.01,1,18 = 8.29, we reject NULL Hypothesis Ho