A New View of Statistics  
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Parameters
Recall that, to fit a straight line to data,
you need a slope and an intercept for the line. The slope and intercept are
called parameters of the model.
If the model is a t test (for example, heights of girls vs boys) or simple ANOVA (heights of three or more subgroups), the parameters are single values of height for each subgroup that best fit the data. The values are, of course, the means of each subgroup.
To complete the picture, what are the parameters if we're modeling the frequency
of something in one or more groups (for example, the prevalence of injury in
different sports)? Too easy: it's just the frequency in each group, or more
exactly, the probability that a person in a each group will have an injury or
whatever.
Solution and Residuals
As we've seen, a relationship or model is
represented by parameters like the slope and intercept of a line, or the means
of groups. To fit a model, the stats program finds values of the parameters
that fit the data best. These values are called the solution. But HOW
is it done?
The standard method is to find the values of the parameters that produce the minimum difference between the observed values of the dependent variable and the values of the dependent variable that would be predicted by the model. The difference between an observed and a predicted value is a residual. It's easiest to understand when the model you are fitting is a straight line. See the diagram, which is the top corner of the heightweight graph blown up so you can see what's what. The observed values are just the weights. The predicted values are the weights on the line corresponding to each observed weight. You should be able to see that if you drew a straight line further away from the points, the residuals overall would get bigger.
The program actually minimizes the sum of the squares of the residuals. Why not just minimize the sum of the raw residuals? Let's just accept that it works best to square the residuals first. So when you fit a straight line, it's known as the leastsquares line. This line doesn't always look quite like the best linethe slope sometimes looks a bit too shallowbut that's because of the way the distances are measured and minimized only in the Y direction. Trust me, it IS the best line! The same applies when you fit curves rather than straight lines. By the way, the rootmeansquare error derived from any model is the standard deviation of the residuals, and the mean of the residuals is always zero.
If the model we're fitting is means for different groups (in an ANOVA), the
predicted values are just the means for each group, and the residuals are the
differences between, for example, each girl's values and the girls' mean, and
ditto the boys.. Easy stuff. And when we're looking at different frequencies
of something in different groups (contingency table), the predicted values are
just the observed frequencies. There aren't any residuals as such in that case,
but you start to get them when you have categorical modeling. No need to understand
this subtlety, though.
Goodness of Fit
I've already introduced the concept of goodness
of fit for simple linear regression. I stated that the correlation is a
good way to describe it, and that 100x the square of the correlationthe percent
of variance explainedis also used. Now that you know about residuals, I can
explain goodness of fit a bit more.
Obviously, the smaller the residuals, the better the fit. One measure of the magnitude of the residuals is their standard deviation, alias the root mean square error. But what can we compare the error with to get a generic measure of goodness of fit? Answer: the standard deviation of the dependent variable itself, before we try to fit any model. This standard deviation represents the amount of variation in the dependent variable, and the error represents the variation that's left over after we fit the model. But statisticians like to make things complicated, right? So they square the standard deviation to get total variance, and they square the error to get error variance. The total variance minus the error variance is... wait for it... the variance explained by the model. Divide the variance explained by the total variance and you have something equivalent to the square of a correlation coefficientwe call it the goodnessoffit R^{2} for the model. Multiply it by 100, and you have... the percent of total variance explained by the model, or just the percent of variance explained. Cool!
Stats books have lots of formulae involving sums of squares, which are what we used to use to calculate statistics in the days before computers. Sums of squares are directly related to variances. The total sum of squares is the sum of the squares of each observed value after the mean has been subtracted from it. The residual sum of squares is exactly what it says. Subtract the residual SS from the total SS, divide by the total SS, and you have another formula for R^{2}.
The R^{2} is also identical to the square of
the correlation between the observed values and the values predicted by the
modelquite a nice way of thinking about goodness of fit for a complex model.
And of course, for a simple linear regression, the R^{2}
for the model is the same as r^{2}, the square
of the correlation coefficient.
The stats program should give you a p value for the R^{2},
which will help you make decisions about the linear relationship between the
dependent variable and independent variable. What programs currently won't do
is give you confidence limits for the R^{2}.
Maybe we don't really want it anyway. It's easier to interpret R rather than
R^{2}, as discussed in the page on scale
of magnitudes. So take the square root of the R^{2},
then work out the confidence interval of this correlation using the Fisher
z transformation. (The "n" in the Fisher formula in this case is the number
of degrees of freedom for the error term in the linear model, minus 1.) I've
set it all up on the spreadsheet for
confidence limits.
Goodness of fit for models in which the dependent variable is nominal is a bit
trickier. As I mentioned earlier, goodness of fit is not usually calculated
for these models, but various analogs of the correlation coefficient (e.g. the
kappa coefficient) can be used. The clinical measures of sensitivity
and specificity can also be regarded as measures of goodness of fit.
Independence of Observations
Independence of observations refers to the
notion that the value of one datum is unrelated to any other datum. In other
words, knowing the value of one observation gives you no information about the
value of any other. To see what happens if this assumption is violated, let's
take an extreme case. Imagine you are doing calculations on what you think is
a large data set, but unbeknownst to you, someone has inflated the sample size
simply by duplicating every observation. The observations in such a data set
are definitely not independent! The correct confidence interval or p value for
a given effect in the data would be given by an analysis based on the original
sample size, obviously. But the confidence interval you get with the spuriously
inflated sample will be narrower (by a factor of about 1/root2, or 0.7), and
the corresponding p value will be smaller too. In general, then, lack of independence
of observations results in incorrectly narrow confidence limits and incorrectly
small p values, because the effective sample size is less than what you think
it is.
Observations that are not independent are also said to be correlated or interdependent . There are some clever tests for independence in some specific situations, but in general you have to decide yourselfwithout recourse to statistical testswhether there is substantial interdependence among the observations in your data set.
An obvious example of interdependence occurs in any intervention: the subjects each provide two or more observations before and after the intervention, and all the observations belonging to a given subject usually have similar values compared with values from other subjects. The usual approach to such data is a repeatedmeasures analysis or mixed modeling.
A statistic summarizing the amount of independence in a set of observations is the degrees of freedom. Well, actually, the degrees of freedom summarizes the amount of independence in the residuals in your modeland that's as it should be, because the residuals are what the stats program uses to calculate the confidence interval. The degrees of freedom is simply the total number of independent bits of error in the residuals. Here's an example: fit a straight line to 10 points and you will have 10 residuals but only 8 degrees of freedom, because the model estimates two parametersthe slope and intercept of the line. Some stats procedures account for interdependence of residuals in some complex models by estimating a reduced number of degrees of freedom for the residuals.
You don't have to worry about the details of degrees of freedom, but you should be aware that the more parameters you estimate in your model, the more degrees of freedom you lose. That's not a problem if your sample size is large, but with a small sample size the uncertainty in the magnitude of the error will translate into substantially wider confidence intervals, because the width of the confidence interval is proportional to the value of a t statistic for the number of degrees of freedom of the residuals. The effect starts to bite when your model reduces your number of degrees of freedom to 10 or less. So if you have small sample sizes, you'll need to keep your models simple.
Normality of Sampling
Distribution
The sampling distribution of any outcome statistic
is the distribution you would expect to get for the values of the statistic,
if you repeated your study many times. To calculate the confidence limits for
the true value of most statistics, a stats program has to assume that this distribution
is normal. If your raw data have a normallooking distribution, the sampling
distribution of all the usual outcome statistics based on the data will definitely
be normal, so there's no problem. But even if your raw data are not normally
distributed, the sampling distribution of a given statistic is often so close
to normal that you can trust the confidence limits and p value.
Question: When can't you trust the confidence limits and p value?
Answer: Depends on how nonnormal your residuals are, and how small your sample
is.
Question: How nonnormal, how small, and how come!?
Answer: Let's address how come first. The residuals sortof add together
to give you the sampling distribution of your statistic. And when you add enough
randomly varying things like residuals together, even though each of them is
not normally distributed, they smooth out into a normal distribution. You can
actually prove it mathematically, and the proof is called the central limit
theorem. Of course, the more nonnormal the residuals, the bigger the sample
size you will need to get a normal sampling distribution. But there are apparently
no rules about how nonnormal the residuals and how small the sample size need
to be before an analysis falls over. I could find nothing on the Web and I got
no joy when I inquired on a statistics mailing list, so I did some simulations
to find out about how nonnormal and how small.
I used a variable that has grossly nonnormal residuals: an ordinal variable having only two values (0 and 1). This variable is what researchers use to code no/yes responses or 2point Likert scales in questionnaires. I restricted the analyses to unpaired t tests of two groups with various sample sizes (for example, a comparison of the responses of 10 boys vs 30 girls). I found that the confidence limits started to go wrong for sample sizes of 10 or less if the average response in one or both groups was <0.3 or >0.7 (corresponding to more than 70% of the responses in each group being on one or other level of the 2point Likert scale). I also tried ordinal variables with 3, 4 and 5 values, corresponding to Likert scales with 3, 4 and 5 levels. For any kind of reasonably realistic spread of responses on these scales, the confidence limits were accurate for samples of 10 or more in each group. The confidence limits went awry only when responses were stacked up on the bottom or top level of the scale, in the same manner as for the 2point scale. Even then they came right for samples of 50 or so.
My conclusion is that people (me included) have worried needlessly about nonnormality of residuals. The time to get worried is when the residuals look really awful and you have a sample of only 10 or so subjects. When that happens, you'll have to try other approaches: logistic regression in the case of Likerttype responses stacked up on one or other extreme value, and some kind of transformation for everything else. I explain transformations on the next few pages, starting with log transformation.
By the way, do not test for nonnormality of the residuals. Residuals that look only remotely normal will work fine in your analyses, even though the test tells you they aren't normal. And with large sample sizes, residuals that look indistinguishable from normal sometimes return a positive test for nonnormality, but your analyses will definitely be OK here.
Uniformity
of Residuals
Your residuals are uniform if their mean is
zero and their scatter (standard deviation) is the same for any subsample or
subgroup of observations. So what does all that mean? I'll try to make
things clear with an example. Here are the data for weight vs height for the
linear regression you saw earlier. I've also plotted the residuals against the
predicteds, which is the best way to check for nonuniformity. (Go back up
this page if you need to remind yourself what residuals and predicteds are.)
Notice that the residuals are more scattered for larger predicted values: that means the standard deviation is larger for the larger values of height. Notice also that there is a dip in the middle of the plot of the residuals: that means the mean of the residuals is positive for the lowest heights, negative for middle heights, and possibly positive again for the highest heights. The dip and the scatter are a bit hard to see, I admit, but you get used to spotting such things. They're easier to see with larger sample sizes. Actually, you can spot the dip and the scatter on the original plot on the leftlook closely and you will see that the scatter about the line gets bigger for bigger heights, and that the data tend to curve about the line of best fit. Another way to spot nonuniformity is to group the predicted values into quantiles of equal numbers of observations, for example five groups (quintiles), then plot the means and standard deviations of the residuals against the mean of each quantile of the predicteds. In the above example, the mean of the residuals would be positive for the lowest group of predicteds, then the means would go negative, then the highest subgroup would be positive again. The standard deviation would be small in the lowest group and largest in the highest group.
The jargon to describe this behavior of residuals is heteroscedasticity (hetero = uneven; scedasticity = scatter). I prefer nonuniform residuals or just bad residuals. So what? Well, the dip in the residuals tells you that the straight line doesn't fit the data properly, as you can see from the raw data, too. So you should either fit a nonlinear model (a curve) instead of a straight line, or you should transform the data to get a straight line. We'll deal with nonlinear models shortly. Transforming the data means changing the values of a variable in some systematic way. The most common ways are log transformation and rank transformation. I go into the details of transformations starting on the next page.
So much for the dip in the residuals, but what about the increasing scatter? If the scatter is not the same everywhere, the confidence limits won't be right, because stats programs work out the confidence limits (and p values) on the assumption that the scatter is the same. For regressiontype models, as in the above example, you have no choice: you have to find a transformation that makes the scatter uniform, as we will see on the next page. For t tests, there is a simpler solution.
The unpaired t test often gives rise to nonuniform residuals, but it's really easy to spot them and to do something about them. The residuals in an unpaired t test are simply the differences between each observation and the mean within each of the two groups. The mean of the residuals in each group is therefore automatically zero, so you don't have to worry about that. The scatter of the residuals is simply the standard deviation of the observations within each group.

For example, if you are comparing females and males, check to see how different the standard deviation is for the males vs the females (see the figure). Then, if the sample size is the same in each group, forget about it! Yes, it doesn't matter how different the standard deviations are, you get the right confidence limits when the groups are the same size. But if the groups differ in size (e.g., by a factor of 1.1 or more) and the standard deviations differ too (also by a factor of 1.1 or more), then you gotta do something. And the answer is... use the t test with unequal variances! It would be better to call it the t test with unequal standard deviations, but statisticians prefer to use the term variance (the square of the standard deviation). Most stats programs offer this option along with the usual t test. Your stats program may even do an extra test of whether the variances within the two groups are equal, but don't take any notice of the p value for that test. Look instead at the size of the standard deviations and the sample sizes, then make your decision about which form of the t test to use. Actually, when the variances are the same and the sample sizes are the same, the confidence limits provided by the two tests are practically identical, so you might as well always use the t test with unequal variances
Uniformity of
Residuals in Complex Models
I have been dealing with uniformity of residuals
in simple models, which consist of one predictor
variable (height or sex in our examples). In more complex
modelsthose with two or more predictor variablesyou should check the
uniformity of the residuals not just across the range of predicted values but
also across the range of values of each of the predictors. You do that by getting
your stats package to output all the residuals with corresponding values of
each predictor variable. For each predictor you then do a plot of the residuals
(Y axis) against the values of the predictor (X axis) and look for nonuniformity.
As in the first example above, you get a better idea of any nonuniformity by plotting the mean and standard deviation of the residuals. For each nominal predictor variable, you show the means and standard deviations on a single plot that includes each level of the variable. For each numeric predictor, you group the values of the predictor into quantiles of equal numbers of observations, just like I explained above for the predicted values. You then plot the means and standard deviations of the residuals against the mean of each quantile of the predictor. Any consistent pattern in the mean of the residuals indicates that the mathematical form of the model for that predictor is inadequate. For example, you might need to introduce a quadratic or a nonlinear term for that variable into the model . Any substantial difference in the standard deviation of the residuals for different levels or values of the predictor indicates that you need to transform the dependent variable.