How can we tell if a model fits the data? If the model is correct thenˆσ 2 should be an unbiased estimate of σ 2. If we have a model which is not complex enough to fit the data or simply takes the wrong form, thenˆσ 2 will overestimate σ 2. An example can be seen in Figure 6.1. Alternatively, if our model is too complex and overfits the data, thenˆσ 2 will… (More)