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Can anyone advise how to interpret this resulting residuals vs fitted graph and what may be wrong with the model?

enter image description here

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    $\begingroup$ Searching for "diagonal" and "residual" gives several other posts on this site for this phenomenon: in ANOVA, in Poisson regression and in multiple regression. I think yours is really a duplicate of the latter, though I like how clearly your graphs show the phenomenon! $\endgroup$
    – Silverfish
    Commented Sep 17, 2016 at 11:59
  • $\begingroup$ Not the answer, but always prefer software in which the axis labels can be lifted to the periphery, leaving just the axes themselves. $\endgroup$
    – Nick Cox
    Commented Sep 17, 2016 at 14:00

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This is a well known phenomenon of regressing integer valued outcomes on a continuous predictor. Aside from that, there is surprisingly little that can be revealed from any "interpretation" of this residual plot.

Example:

> x <- rexp(1000)
> y <- rpois(1000, x)
> plot(y ~ x)

enter image description here

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