Page 127 - Intermediate Statistics for Dummies

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Part II: Making Predictions by Using Regression
Checking the third condition
The third condition is that the residuals are independent (in other words,
they don’t affect each other). Looking at the lower-right plot on either Figure
5-4 or 5-5, you can see the residuals plotted by observation number, which is
the order in which the data came in the sample. If you see a pattern (if you
were to connect the dots so to speak, you get a straight line, or a curve, or
any kind of predictable up or down trend), you have trouble. You can see no
patterns in the lower-right plots, so the independence condition is met for
the ads and plasma TV sales example.
If the data must be collected over time, such as stock prices over a ten-year
period, the independence condition may be a big problem because the data
from the previous time period may be related to the data from the next time
period. This kind of data requires time series analysis and is beyond the
scope of this book.