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1.2 Exploring Prediction Using Data

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The second fundamental task of statistics is prediction. Data for this task are typically ordered pairs, . The goal is to predict the value of the variable using the corresponding value of the variable. For example, we might try to predict a son's height () knowing the father's height (). Or a bank contemplating a mortgage loan may use a person's credit score to predict the probability the person will default on the loan.

The initial step is to plot a scatter diagram of the data points in order to determine if there is a strong relationship between and . The relationship, if it exists, is linear or nonlinear. If knowledge of does not convey any information about the value of , then the scatter diagram will have no slope or trends, with values just scattered around their average.

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