13: Beyond the Classical Model

In this part of the book, perhaps the final part, we expand the framework of the classical linear model (CLM) to address a wider, more realistic range of data types commonly encountered in research. The standard regression model, with its assumption of a continuous, normally distributed dependent variable, is often inadequate. Many outcomes of interest are inherently limited — they may be binary (e.g., success/failure), represent counts (e.g., number of events), or fall into ordered or unordered categories. Generalized Linear Models (GLMs) provide a unified and flexible methodology for these situations by relaxing the assumptions of ordinary least squares regression.

The core innovation of GLMs is their three-component structure:

1. a stochastic component specifying a probability distribution from the exponential family (e.g., Bernoulli, Binomial, Poisson),
2. a linear predictor (\(\eta = \mathbf{Xb}\)) that functions as in linear regression, and
3. a link function (\(g(\cdot)\)) that connects the mean of the dependent variable to this linear predictor.

This allows us to model the expected value of non-normal outcomes through a transformation, ensuring predictions remain within meaningful bounds (e.g., between 0 and 1 for probabilities).

We begin with an overview of GLMs in which the conditional distribution is Gaussian (Normal). This will explicitly show that GLMs are just an extension of the CLM. After that bridge, we begin with models for binary dependent variables (logistic regression), where the logit link models the log-odds of an event. This extends to binomial dependent variables for proportions based on a known number of trials. For count data, we employ Poisson regression (and its over-dispersed extensions), using a log link to model rates. Finally, we generalize further to outcomes with multiple categories, exploring multinomial (nominal) regression for unordered choices and ordinal regression for ranked categories, where the link function preserves the inherent order of the response. Together, these tools empower you to model diverse, real-world phenomena with appropriate statistical rigor.

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