1.

Try to create a model based on the present and projected data using the linear,
quadratic, cubic and quartic. In a matrix (table) compare the different regression
models. Choose the best fit and justify your choice.

y = 8.5835x + 324.71 y = -0.3208x2 + 19.229x + 256.85

R² = 0.1259 R² = 0.1363
P-value = 0.069384 P-value = 0.17221

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Figure 1. Linear Regression Figure 2. Quadratic Regression

y = 0.2168x3 - 10.751x2 + 159.56x - 206.86 y = 0.0009x4 + 0.1578x3 - 9.439x2 +

R² = 0.3793 148.65x - 181.67
P-value = 0.010733 R² = 0.3794
P-value = 0.027193

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Figure 3. Cubic Regression Figure 4. Quartic Regression

 This study wants to determine and compare which regression model could be the

best fit in identifying the sustainability of the company’s growth until the early quarter of

2014 using the present and projected data. It is the comparison of the r2 and the p-vale,

if the r2 is closer to one (1) the better the strength of the model is. A low p-value (<0.05)

indicates that the null hypothesis is rejected and also indicates that the variables are

significantly difference. In other words, predictor that has a low p-value is likely to be

meaningful addition to the model because changes in the predictor’s value are related to

changes in the responsive variable. Conversely, a larger p-value suggest that changes in

the predictor are not associated with the changes in the response. The table below shows

the matrix in comparing the four (4) regression models.

Regression
R2 P-Value
Model ( Closer to 1 ) ( <0.05 )

The P-value (=0.069384) is greater

than the common alpha level of 0.05,
r2 (= 0.125877), the R square says
which indicates that it is not
that only 13% is the linear
Linear statistically significant. The data on
regression if it used as a model in
the rates and claims are not
the case.
statistically different.

Quadratic The P-value (=0.17221) is greater

than the common alpha level of 0.05,
which indicates that it is not
r2 (= 0.136349), the R square says
statistically significant. The data on
that only 14% is the Quadratic
the rates and claims are not
regression if it used as a model in
statistically different. The p-value of
the case. Based on this value it is
the quadratic is greater than the
better to use than the Linear
Linear. Even though the r2 of the
Regression. However the p-value
quadratic, the linear regression is
will confirm what method is better.
much better than quadratic because of
the resulting p-value.

Cubic r2 (=0.379252), the R square says
that only 38% is the cubic
regression if it used as a model in
the case. Thus, this method is far
better than the linear and quadratic.
The P-value (=0.010733) is less than
the common alpha level of 0.05, which
indicates that it is statistically
significant. The data on the rates and
claims are statistically different. Thus,
it is better to use this method rather
 than the linear and quadratic because
of the p-value that this method is
significant.

Quartic The P-value (=0.027193) is less than

r2(= 0.379437), the R square says
that only 38% is the quartic
regression if it used as a model in
the case. It has the same value with
the cubic, however it will vary on the
p-value results of the two mode.
the common alpha level of 0.05, which
indicates that it is statistically
significant. The data on the rates and
claims are statistically different.
However, Cubic is better than this
model because it has a lower p-value.

Based on the four model – Linear, Quadratic, Cubic and Quartic, the best method that is
fitted in answering the problem in the case is the Cubic Regression. The r2 and p-value shows
that the justification of this conclusion. The result in the r2 shows that Cubic is closer to 1, thus
this method has a better strength as a model compared to the others. In addition, p-value
justifies that there is a significant difference between in the claims and rates. It also indicates
that the null hypothesis is rejected. In other word, cubic is the predictor fitted in the case
because the predictor is related to the response variable.