In a regression model, what is a residual?
Correct Answer
A) The gap between actual and predicted value
Why this is correct: In regression, a residual is the difference between an observed sale price and the price predicted by the model, used to check model accuracy. Why the other choices are wrong: "The income left after building requirements" is unrelated to regression residuals. "The portion of the sample left unanalyzed" refers to a holdout sample, not residuals. "The coefficient attached to each predictor" is a regression coefficient, not a residual. Exam tip: Residuals are prediction errors; patterns in residuals indicate model misspecification.
Why This Is the Correct Answer
Why this is correct: In regression, a residual is the difference between an observed sale price and the price predicted by the model, used to check model accuracy. Why the other choices are wrong: "The income left after building requirements" is unrelated to regression residuals. "The portion of the sample left unanalyzed" refers to a holdout sample, not residuals. "The coefficient attached to each predictor" is a regression coefficient, not a residual. Exam tip: Residuals are prediction errors; patterns in residuals indicate model misspecification.
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