# When/why not to use studentized residuals for regression diagnostics?

Consider a linear regression $$y=X\beta+\varepsilon.$$ Residuals $$e:=y-X\hat\beta$$ are often used as substitutes for the unobserved model errors $$\varepsilon$$ for validating assumptions such as homoskedasticity of $$\varepsilon$$, normality of $$\varepsilon$$ and other.

When the model errors $$\varepsilon$$ are homoskedastic with variance $$\sigma^2_\varepsilon$$, the residuals $$e$$ have unequal variances: $$\text{Var}(e)=\sigma^2_\varepsilon(I-H)$$ where $$I$$ is an identity matrix and $$H:=X(X^\top X)^{-1}X^\top$$ is the hat matrix. (For the same reason, the residuals are also correlated.)

The heteroskedasticity in $$e$$ can be "corrected for"/"undone" by using (internally or externally) studentized residuals $$\tilde{e}_{int}:=\frac{e}{\hat\sigma_{int}\sqrt{1-h_{ii}}}$$ or $$\tilde{e}_{ext}:=\frac{e}{\hat\sigma_{ext}\sqrt{1-h_{ii}}}$$ where $$\hat\sigma_{int}$$ and $$\hat\sigma_{ext}$$ are internal and external estimates of error variance, respectively.

This heteroskedasticity correction seems to come at zero cost. No estimation or approximation errors seems to be introduced this way, aside from uniform (across data points) scaling due to imperfect estimates $$\hat\sigma_{int}$$ and $$\hat\sigma_{ext}$$, and the computational cost is low. This might suggest we should routinely use studentized residuals instead of raw residuals for regression diagnostics, because this way we remedy the problem of heteroskedasticity of $$e$$ without really sacrificing anything.

Question: Are there any reasons for not using $$\tilde{e}_{int}$$ or $$\tilde{e}_{ext}$$ instead of $$e$$ as a substitute for the true unobserved $$\varepsilon$$ whenever doing model diagnostics regarding homoskedasticity, normality and other common assumptions/conditions?

• – Richard Hardy May 3 '19 at 13:01
• – Richard Hardy May 3 '19 at 13:52
• This looks like an endemic in statistical literature. I have encountered books and university class web pages that tell students that residuals are IID. sphweb.bumc.bu.edu/otlt/MPH-Modules/BS/R/…, and restore.ac.uk/srme/www/fac/soc/wie/research-new/srme/modules/…, and www-personal.umich.edu/~gonzo/coursenotes/file7.pdf. It may have already become a pandemic, that I don't know. – Cagdas Ozgenc Nov 19 '19 at 13:33
• @CagdasOzgenc, thank you for your comment! Actually, despite years of econometric and statistical education, I was never taught this and eventually discovered this in a random textbook. The facts seem to have been buried too deep in the part of the literature that I was familiar with. Based on what you said, should I conclude that the answer to the question Are there any reasons... is a No? – Richard Hardy Nov 19 '19 at 13:49
• To tell you the truth I don't understand why one will prefer to use a wrong distribution. But I have seen it done in so many places that I question myself. I am not an academic or an authority on the matter. It looks to me only externally studentized version is viable as an analytical solution with a t-distribution. What is your opinion? – Cagdas Ozgenc Nov 19 '19 at 13:55