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Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Regression Analysis
Year 1 2 3 4 5 6 7 8 9 10 X 10 9 11 12 11 12 13 13 14 15 Y 44 40 42 46 48 52 54 58 56 60
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Scatter Diagram
Regression Analysis
Regression Line: Line of Best Fit
Regression Line: Minimizes the sum of the squared vertical deviations (et) of each point from the regression line. Ordinary Least Squares (OLS) Method
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Regression Analysis
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Yt a bX t et Yt Yt
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
(X
t 1 n t 1
X )(Yt Y )
t
(X
a Y bX
X)
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Xt
10 9 11 12 11 12 13 13 14 15 120
Yt
44 40 42 46 48 52 54 58 56 60 500
Xt X
-2 -3 -1 0 -1 0 1 1 2 3
n
Yt Y
-6 -10 -8 -4 -2 2 4 8 6 10
( X t X )(Yt Y )
12 30 8 0 2 0 4 8 12 30 106
( X t X )2
4 9 1 0 1 0 1 1 4 9 30
n 10
X
t 1 n
X t 120
t 1
Yt 500
t 1
(X
t 1 n
X ) 2 30 X )(Yt Y ) 106
106 3.533 b 30
a 50 (3.533)(12) 7.60
X t 120 12 n 10
Yt 500 50 10 t 1 n
(X
t 1
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
X t 120 12 n 10
X
t 1
120
2
Y
t 1
500
Yt 500 50 10 t 1 n
(X
t 1 n
X ) 30 X )(Yt Y ) 106
106 3.533 b 30
(X
t 1
a 50 (3.533)(12) 7.60
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Standard Error of the Slope Estimate
(Yt Y ) 2 et2
sb
(n k ) ( X t X )
(n k ) ( X t X ) 2
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Example Calculation
Time
1 2 3 4 5 6 7 8 9 10
Xt
10 9 11 12 11 12 13 13 14 15
Yt
44 40 42 46 48 52 54 58 56 60
Yt
42.90 39.37 46.43 49.96 46.43 49.96 53.49 53.49 57.02 60.55
et Yt Yt
1.10 0.63 -4.43 -3.96 1.57 2.04 0.51 4.51 -1.02 -0.55
et2 (Yt Yt )2
1.2100 0.3969 19.6249 15.6816 2.4649 4.1616 0.2601 20.3401 1.0404 0.3025 65.4830
( X t X )2
4 9 1 0 1 0 1 1 4 9 30
e (Yt Yt )2 65.4830
t 1 2 t t 1
(X
t 1
X ) 30
2
sb
(Y Y ) ( n k ) ( X X )
2 t t
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Example Calculation
et2 (Yt Yt ) 2 65.4830
t 1 t 1 n n
( X t X ) 2 30
t 1
)2 (Yt Y
Tests of Significance
Calculation of the t Statistic
b 3.53 t 6.79 sb 0.52
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Decomposition of Sum of Squares
Total Variation = Explained Variation + Unexplained Variation
Y )2 (Y Y )2 (Yt Y ) (Y t t
2
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Decomposition of Sum of Squares
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Coefficient of Determination
R2 Explained Variation TotalVariation (Yt Y )2 (Y Y )2
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Tests of Significance
Coefficient of Correlation
r R2 withthe signof b
1 r 1
r 0.85 0.92
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Model:
Y a b1 X 1 b2 X 2
bk ' X k '
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
R 2 1 (1 R 2 )
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Durbin-Watson Statistic
Test for Autocorrelation
(et et 1 ) 2
t 2 n
et2
t 1
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.
Power Function:
b QX a ( PX1 )( PYb2 )
Estimation Format:
ln QX ln a b1 ln PX b2 ln P Y
Harcourt, Inc. items and derived items copyright 2001 by Harcourt, Inc.