ABSTRACT
In this chapter we show how to make hypothesis tests and construct confidence intervals. These inferential methods are the building blocks for drawing conclusions using models and data.
If you simply wish to estimate the parameters β, it is not essential to assume any distributional form for the errors ε. However, if we want to make any confidence intervals or perform any hypothesis tests using the most commonly used methods, we will need to do this. Now we are going to assume that the errors are normally distributed. Often this is quite reasonable but we will discuss later how we can check this assumption and how we might deal with data where the normality assumption is not justifiable.
