Statistics for Managerial

Decision

Project Report on Regression

Analysis

Name: Asif Mahamud

MBA Semester I
Session: 2021-23 Class Roll no: 22
Department of Business Management
University of Calcutta
 Regression Analysis Project Report
Problem Statement: Given the home-loan/ mortgage interest rate (independent
variable) for sixteen years, estimate the regression line for home prices (dependent
variable)
Data Interpretation:

Linear Regression - One dependent variable

Mortgage interest rates and home prices
X VARIABLE Y VARIABLE
Year 30-year mortgage interest rate (%) Home price
1988 10.30 $1,83,800
1989 10.30 $1,83,200
1990 10.10 $1,74,900
1991 9.30 $1,73,500
1992 8.40 $1,72,900
1993 7.30 $1,73,200
1994 8.40 $1,73,200
1995 7.90 $1,69,700
1996 7.60 $1,74,500
1997 7.60 $1,77,900
1998 6.90 $1,88,100
1999 7.40 $2,03,200
2000 8.10 $2,30,200
2001 7.00 $2,58,200
2002 6.50 $3,09,800
2003 5.80 $3,29,800
Average 7.75 $1,80,550
From the above data, create a Scatter Plot with Regression line and Regression Analysis.
1. Scatter Plot:

Mortgage interest rates and home prices

$3,50,000

$3,00,000

$2,50,000
Home price

$2,00,000

$1,50,000

$1,00,000 y = -23409x + 393349

R² = 0.3846
$50,000

$0
0.00 2.00 4.00 6.00 8.00 10.00 12.00
30-year mortgage interest rate (%)
 2. Regression Analysis:
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.620157
R Square 0.384595
Adjusted R Square 0.340638
Standard Error 41456.52
Observations 16

ANOVA
Significance
Df SS MS F F
Regression 1 1.5E+10 1.5E+10 8.749252 0.010382
Residual 14 2.41E+10 1.72E+09
Total 15 3.91E+10

Standard Upper Lower Upper

Coefficients Error t Stat P-value Lower 95% 95% 95.0% 95.0%
Intercept 393348.6 64595.45 6.089417 2.79E-05 254805.2 531892.1 254805.2 531892.1
30-year mortgage
interest rate (%) -23409.4 7914.176 -2.95791 0.010382 -40383.7 -6435.23 -40383.7 -6435.23

Interpreting of Results:
 The multiple R be thought of as the absolute value of the correlation coefficient (or the correlation
coefficient without the negative sign).
 The R2 value, also known as the coefficient of determination, measures the proportion of variation
in the dependent variable explained by the independent variable or how well the regression
model fits the data. The R2 value ranges from 0 to 1, and a higher value indicates a better fit.
 The ANOVA table gives the F statistic for testing the claim that there is no significant relationship
between the independent and dependent variables. The sig. value is the p value. The p-value, or
probability value, also ranges from 0 to 1 and indicates if the test is significant. In contrast to the
R2 value, a smaller p-value is favorable as it indicates a correlation between the dependent and
independent variable.
 The Columns below the Coefficients box gives the b0 and b1 values for the regression equation.
The intercept value is always b0. The b1value is next to the independent variable, x (Mortgage
interest rates)
 In the last P-value column of the coefficient output data, the p values for individual t tests for
Mortgage interest rates is given. Recall that this t test tests the claim that there is no relationship
between the independent variable and the dependent variable. Thus we should reject the claim
that there is no significant relationship between the independent variable and dependent variable
if p<α.
Conclusion:
1. Y and X relationship:

R Square (R2) equals 0.3846. It means that 38.5% of the variability of Y is explained by X.

Correlation (R) equals -0.6202. It means that there is a strong inverse relationship between X and Y.

Multiple R equals to 0.6202 as it denotes the absolute value of correlation.

2. Goodness of fit:
Overall regression: right-tailed, F(1,14) = 8.7493, p-value = 0.01038. Since p-value < α (0.05), we
reject the H0.
The linear regression model, Y = b0+ b1X + ε, provides a better fit than the model without the
independent variable resulting in, Y = b0 + ε.
The Slope (a): two-tailed, T(14)=-2.9579, p-value = 0.01038. For one predictor it is the same as
the p-value for the overall model.
The Y-intercept (b): two-tailed, T(14) = 6.0894, p-value = 0.00002793. Hence b is significantly
different from zero.

3. Residual normality:
The linear regression model assumes normality for residual errors. Shapiro will p-value equals
0.09659. It is assumed that the data is normally distributed.

4. Outliers:
The data does not contain any outliers.

5. In the chart of linear regression we can see that y = -23409x is the slope and +393349 is the
intercept. The trend line is negatively sloped. Which means increase in interest rate causes
price of the house decrease. The intercept in the chart is showing that if the interest rate 0
(zero) the price of the home will be 393349 or above.