Solved – the difference between errors and residuals

errorresidualsterminology

While these two ubiquitous terms are often used synonymously, there sometimes seems to be a distinction. Is there indeed a difference, or are they exactly synonymous?

Best Answer

Errors pertain to the true data generating process (DGP), whereas residuals are what is left over after having estimated your model. In truth, assumptions like normality, homoscedasticity, and independence apply to the errors of the DGP, not your model's residuals. (For example, having fit $p+1$ parameters in your model, only $N-(p+1)$ residuals can be independent.) However, we only have access to the residuals, so that's what we work with.