202406061356
Status: #idea
Tags: Regression Analysis, MAT3375 ~ Regression Analysis
State: #nascient

Hypothesis Testing about Rho

The estimator for ρ is:

r=SxySxxSyy=β^1SxxSyy

The Simple Case

To check for significance of the correlation, we use an hypothesis test with the following t stat, under the assumption that ρ=0

T=rn21r2t(n2)

In R, we use cor.test

The Harder Case

Sadly, when we want to check for cases where we thing ρ is different from 0, we need to use a transformation. Indeed, if H0 is ρ=ρ00 , then we use:

Zobs=12[ln(1+r)ln(1r)]=12[ln(1+r1r)]N(μz;1n3)]

Where μz is:

μz=12ln(1+ρ1ρ)

Besides the fact these formulas come from nowhere, since Zobs is normally distributed, we can reject if |Zobs|>Zα2