The F-Test for Regression Analysis

Suppose by means of some analysis, we were to deduce that today's value of the DJIA Closing Price may turn out to be a good predictor of tomorrow's Closing Price. To test this theory, we will develop a linear regression model consisting of a single regression variable. This variable will be the time lagged value of the time series. Here are the first few rows of the modified Data Frame. Let's remove the first row to get rid of the NaN: Next let's create our training and test data sets: Plot the model's performance against the test data set: At first glance, this model's performance looks much better than what we got from the mean model.