The simplest and most used of all statistical regression models. The model states that the random variable Y is related to the variable x bywhere the parameters α and β correspond to the intercept and the slope of the line, respectively, and ε denotes a random error. With observations (x1, y1), (x2, y2),…, (xn, yn) the usual assumption is that the random errors are independent observations from a normal distribution with mean 0 and variance σ2. In this case the parameters are usually estimated using ordinary least squares (see method of least squares). The estimates, denoted by α̂ and β̂, are given bywhere x̄ and y¯ are the means of x1, x2,…, xn and y1, y2,…, yn, respectively, and whereThe variance σ2 is estimated bywhere .
A 100(1−2θ)% confidence interval for β is provided bywhere tν(θ) is the upper 100θ% point (see percentage point) of a t-distribution with ν degrees of freedom. A 100(1−2θ)% confidence interval for the expected value of Y when x=x0 isA 100(1−2θ)% prediction interval for the value y0 of Y when x=x0 isSee also multiple regression model; regression diagnostics; regression through the origin.
http://onlinestatbook.com/stat_sim/reg_by_eye/index.html Applet.