Regression

 

 

UNIT 4 SUCCESS GUIDE

 

Dr. Altinoz 

GB 513 SUPPORT  MATERIALS 

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UNIT 4 SUCCESS GUIDE RESOURCES

1. As always, start by reading the chapters and studying the solved examples. 2. Watch my lecture video on regression in document sharing. It explains how to interpret

the metrics from the output report. This should help you answer all of question 2 in the assignment. It’s also critical for the final project.

3. To learn about creating a scatter graph and fitting a trend line (for questions 1 and 3), you can either watch the last part of my forecasting lecture (after minute 28) or this video: http://www.youtube.com/watch?v=6rOlGbLeQxI.

4. Watch the sample problem solutions in document sharing. 5. If you still want more videos, search YouTube for “multiple regression.”

Email me at [email protected] if you find any of these links to be broken.

COMMON MISTAKES IN THE ASSIGNMENT Avoid these mistakes!

 In regression, the coefficient is not what determines if a variable is “significant”!  Similarly, the P-value does not show the impact of a variable, or which variable is more

important.  Some students do not calculate the forecast in question 1 and stop after writing the

formula.  Question 3 asks “Can the bond rate be predicted by the prime interest rate?” Many

students just run a regression and leave that question unanswered. Note that the grading rubric has a section specifically for that answer.

SAMPLE PROBLEMS AND SOLUTIONS The questions below are very similar to what you need to solve in the assignment. Some, but not all, of these solutions were demonstrated on video and recorded for the live binder by the math tutors.

S AM P L E PR O B L E M 1 F O R AS S I G N M E N T P R O B L E M 1 Determine the equation of the trend line for the data shown below on U.S. exports of fertilizers to Indonesia over a five-year period provided by the U.S Census Bureau. Using the trend line equation, forecast the value for the year 2013.

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Year Fertilizer ($ millions)

2007 11.9

2008 17.9

2009 22.0

2010 21.8

2011 26.0.

S O L U T I O N The first problem in the assignment requires you to run a regression and use the results to make the forecast. It is NOT meant to be solved using manual formulas. The table below shows the output from running the regression tool in excel. Note that the y variable is the export amount and the x variable is the year.

SUMMARY OUTPUT

Regression Statistics Multiple R 0.953955 R Square 0.910031 Adjusted R Square 0.880041 Standard Error 1.842733

Observations 5

ANOVA

df SS MS Regression 1 103.041 103.041 30.34485 Residual 3 10.187 3.395667

Total 4 113.228

Coefficients Standard Error t Stat P-value Intercept -6428.97 1170.692 -5.4916 0.01188

Year 3.21 0.582723 5.508616 0.011778

The forecast for the year 2012 is: y= -6428.97 + (2013) 3.21 = 32.76

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S AM P L E P R O B L E M 1 F O R AS S I G N M E N T P R O B L E M 2 The problem I solve in the regression lecture is almost exactly like problem 2 in your assignment. You will have to interpret the metrics on the report, then write and solve the regression formula.

S AM P L E PR O B L E M 1 F O R AS S I G N M E N T P R O B L E M 3 This problem is intended to be solved through graphing. When fitting a trend line to a scatter or line graph, it is only a matter of a button click to fit a linear or a quadratic trend line. Just watch the second part of my forecasting lecture (after minute 28) to see an example of fitting trend lines. The forecasting video is the one for Unit 5. The other video listed in the resources is also a good example.