Question
Suppose that you fit an Ordinary Least Squares (OLS) regression model to predict revenues for a restaurant. You then go to inspect visually for possible
Suppose that you fit an Ordinary Least Squares (OLS) regression model to predict revenues for a restaurant. You then go to inspect visually for possible violations of OLS assumptions of the resulting linear model and prepare two residual diagrams shown below. Based on a visual inspection of these diagrams, which OLS assumption violations would you suspect in each plot? Please explain the rationale for your answers and refer to the appropriate plot. Also, which test would you conduct to evaluate these OLS violations statistically? If the tests confirm the violation of these assumptions, discuss how would you correct for each of them.
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