Multiple Regression & Prediction

Problemsinclass_modified.docx

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Problems in class_Simple Regression Model

1. The file P02_10.xlsx contains midterm and final exam scores for 96 students in a corporate finance course. Each row contains the two exam scores for a given student, so you might expect them to be positively correlated.

a) Create a scatterplot of the final exam score (Y) versus the midterm score (X). Based on the visual evidence, would you say that the scores for the two exams are strongly related? Is the relationship a linear one? Superimpose a trend line on the scatterplot.

b) Estimate a simple linear regression equation using the given data and interpret it.

What is the value of Rin this model? Explain Rin words.

d) Is this model statistically significant? What is the p-value? Use alpha=0.05.

e) Develop a residual plot using excel. Are any assumptions violated? Explain.

f) Draw a normal probability plot of residuals by finding out the Z-score of the residuals. Use Excel. Plot Z-score at the horizontal axis and residuals at the vertical axis. Do the residuals seem normally distributed? Explain.