In a P-P plot, what does it indicate if the points lie close to the diagonal?

• A. The observed distribution matches the specified distribution.
• B. The points lie close to the diagonal, indicating a good fit.
• C. The plot shows a strong nonlinearity.
• D. The plot reveals major heteroscedasticity.

Answer: (B)

In a P-P plot, you’re comparing the observed cumulative probabilities to the expected ones from a specified distribution. When the points lie close to the diagonal, the observed probabilities match the expected probabilities closely, so the data are well described by that distribution. In other words, it indicates a good fit to the specified distribution. If the points deviate, it signals departures in location, spread, or shape from the reference distribution. Issues like heteroscedasticity or nonlinearity aren’t what this plot primarily tests; they would show up as systematic deviations from the diagonal.