National open university of nigeria introduction to econometrics I eco 355

5.0 
SUMMARY 

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131 
In this unit we have discuss the meaning of regression analysis and analysis of variance. 
However, some of the calculation of regression analysis and variance was also examine 
in this unit, therefore I belief you must have learn a lot in this unit.
 
6.0 
TUTOR MARKED ASSESSMENT EXERCISE 
Differentiate between regression analysis and variance analysis. 
 
7.0 
REFERENCES/FURTHER READINGS 
 
 
Gujarat, D. N. (2007) Basic Econometrics, 4
th
Edition, tata Mcgraw – Hill publishing 
company limited, New Delhi. 
Hall, S. G., & Asterion, D. (2011) Applied Econometrics, 2
nd
Edition, Palgrave 
Macmillian, New York city, USA. 
 
 
 
 
UNIT FOUR: Normality Tests 
 
CONTENTS 
 
1.0 Introduction 
2.0 Objectives 
3.0 Main content 
3.1.
Normality test analysis 
3.1.1.
Histogram of Residuals 
3.1.2.
Normal Probability Plot 
3.1.3.
Jarque-Bera (JB) test of Normality 
4.0 
Conclusion 
5.0 
Summary 
6.0 
Tutor-Marked Assignment 
7.0. References 
 
 
1.0.
 
INTRODUCTION 

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132 
In statistics, normality tests are used to determine if a data set is well-modeled by a 
normal distribution and to compute how likely it is for a random variable underlying the 
data set to be normally distributed. 
Before applying statistical methods that assume normality, it is necessary to perform a 
normality test on the data (with some of the above methods we check residuals for 
normality). We hypothesize that our data follows a normal distribution, and only reject 
this 
hypothesis 
if 
we 
have 
strong 
evidence 
to 
the 
contrary. 
While it may be tempting to judge the normality of the data by simply creating a 
histogram of the data, this is not an objective method to test for normality – especially 
with sample sizes that are not very large. With small sample sizes, discerning the shape 
of the histogram is difficult. Furthermore, the shape of the histogram can change 
significantly by simply changing the interval width of the histogram bars.