Here's a screencast illustrating a theoretical p th percentile. The theoretical p th percentile of any normal distribution is the value such that p% of the measurements fall below the value.
The graph shown in the screen-shot above is. Shading a portion of the distribution (see below). If the resulting plot is approximately linear, we proceed, assuming that the error terms are normally distributed. Download Now (.xls) In addition to graphing the Normal distribution curve, the normal distribution spreadsheet includes examples of the following: Generating a random number from a Normal distribution. Since we are concerned about the normality of the error terms, we create a normal probability plot of the residuals. Here's the basic idea behind any normal probability plot: if the data follow a normal distribution with mean \(\mu\) and variance \(σ^\), then a plot of the theoretical percentiles of the normal distribution versus the observed sample percentiles should be approximately linear. In this section, we learn how to use a ' normal probability plot of the residuals' as a way of learning whether it is reasonable to assume that the error terms are normally distributed.
Recall that the third condition - the 'N' condition - of the linear regression model is that the error terms are normally distributed.
