Errors and residuals

In univariate distributions

If we assume a normally distributed population with mean μ and standard deviation σ, and choose individuals independently, then we have

${\displaystyle X_1,\dots ,X_n\sim N\left(\mu ,{\sigma }^2\right)}$

and the sample mean

${\displaystyle \overline{X}=\frac{X_1+\cdots +X_n}{n}}$

is a random variable distributed such that

${\displaystyle \overline{X}\sim N\left(\mu ,\frac{{\sigma }^2}{n}\right).}$

The statistical errors are then

${\displaystyle e_i=X_i-\mu ,}$

with expected values of zero, whereas the residuals are

${\displaystyle r_i=X_i-\overline{X}.}$

The sum of squares of the statistical errors, divided by σ², has a chi-squared distribution with n degrees of freedom:

${\displaystyle \frac{1}{{\sigma }^2}\sum _{i=1}^n{e}_i^2\sim {\chi }_n^2.}$

However, this quantity is not observable as the population mean is unknown. The sum of squares of the residuals, on the other hand, is observable. The quotient of that sum by σ² has a chi-squared distribution with only n − 1 degrees of freedom:

${\displaystyle \frac{1}{{\sigma }^2}\sum _{i=1}^n{r}_i^2\sim {\chi }_{n-1}^2.}$

This difference between n and n − 1 degrees of freedom results in Bessel's correction for the estimation of sample variance of a population with unknown mean and unknown variance. No correction is necessary if the population mean is known.

Remark

It is remarkable that the sum of squares of the residuals and the sample mean can be shown to be independent of each other, using, e.g. Basu's theorem. That fact, and the normal and chi-squared distributions given above form the basis of calculations involving the t-statistic:

${\displaystyle T=\frac{{\overline{X}}_n-{\mu }_0}{S_n/\sqrt{n}},}$

where ${\displaystyle {\overline{X}}_n-{\mu }_0}$ represents the errors, ${\displaystyle S_n}$ represents the sample standard deviation for a sample of size n, and unknown σ, and the denominator term ${\displaystyle S_n/\sqrt{n}}$ accounts for the standard deviation of the errors according to

$${\displaystyle \mathrm{Var}\left({\overline{X}}_n\right)=\frac{{\sigma }^2}{n}.}$$

The probability distributions of the numerator and the denominator separately depend on the value of the unobservable population standard deviation σ, but σ appears in both the numerator and the denominator and cancels. That is fortunate because it means that even though we do not know σ, we know the probability distribution of this quotient: it has a Student's t-distribution with n − 1 degrees of freedom. We can therefore use this quotient to find a confidence interval for μ. This t-statistic can be interpreted as "the number of standard errors away from the regression line."

Regressions

In regression analysis, the distinction between errors and residuals is subtle and important, and leads to the concept of studentized residuals. Given an unobservable function that relates the independent variable to the dependent variable – say, a line – the deviations of the dependent variable observations from this function are the unobservable errors. If one runs a regression on some data, then the deviations of the dependent variable observations from the fitted function are the residuals. If the linear model is applicable, a scatterplot of residuals plotted against the independent variable should be random about zero with no trend to the residuals. If the data exhibit a trend, the regression model is likely incorrect; for example, the true function may be a quadratic or higher order polynomial. If they are random, or have no trend, but "fan out" - they exhibit a phenomenon called heteroscedasticity. If all of the residuals are equal, or do not fan out, they exhibit homoscedasticity.

However, a terminological difference arises in the expression mean squared error (MSE). The mean squared error of a regression is a number computed from the sum of squares of the computed residuals, and not of the unobservable errors. If that sum of squares is divided by n, the number of observations, the result is the mean of the squared residuals. Since this is a biased estimate of the variance of the unobserved errors, the bias is removed by dividing the sum of the squared residuals by df = n − p − 1, instead of n, where df is the number of degrees of freedom (n minus the number of parameters (excluding the intercept) p being estimated - 1). This forms an unbiased estimate of the variance of the unobserved errors, and is called the mean squared error.

Another method to calculate the mean square of error when analyzing the variance of linear regression using a technique like that used in ANOVA (they are the same because ANOVA is a type of regression), the sum of squares of the residuals (aka sum of squares of the error) is divided by the degrees of freedom (where the degrees of freedom equal n − p − 1, where p is the number of parameters estimated in the model (one for each variable in the regression equation, not including the intercept)). One can then also calculate the mean square of the model by dividing the sum of squares of the model minus the degrees of freedom, which is just the number of parameters. Then the F value can be calculated by dividing the mean square of the model by the mean square of the error, and we can then determine significance (which is why you want the mean squares to begin with.).

However, because of the behavior of the process of regression, the distributions of residuals at different data points (of the input variable) may vary even if the errors themselves are identically distributed. Concretely, in a linear regression where the errors are identically distributed, the variability of residuals of inputs in the middle of the domain will be higher than the variability of residuals at the ends of the domain: linear regressions fit endpoints better than the middle. This is also reflected in the influence functions of various data points on the regression coefficients: endpoints have more influence.

Thus to compare residuals at different inputs, one needs to adjust the residuals by the expected variability of residuals, which is called studentizing. This is particularly important in the case of detecting outliers, where the case in question is somehow different from the others in a dataset. For example, a large residual may be expected in the middle of the domain, but considered an outlier at the end of the domain.

Other uses of the word "error" in statistics

The use of the term "error" as discussed in the sections above is in the sense of a deviation of a value from a hypothetical unobserved value. At least two other uses also occur in statistics, both referring to observable prediction errors:

The mean squared error (MSE) refers to the amount by which the values predicted by an estimator differ from the quantities being estimated (typically outside the sample from which the model was estimated). The root mean square error (RMSE) is the square root of MSE. The sum of squares of errors (SSE) is the MSE multiplied by the sample size.

Sum of squares of residuals (SSR) is the sum of the squares of the deviations of the actual values from the predicted values, within the sample used for estimation. This is the basis for the least squares estimate, where the regression coefficients are chosen such that the SSR is minimal (i.e. its derivative is zero).

Likewise, the sum of absolute errors (SAE) is the sum of the absolute values of the residuals, which is minimized in the least absolute deviations approach to regression.

The mean error (ME) is the bias. The mean residual (MR) is always zero for least-squares estimators.