BUS105: Statistics

Seminar 3 - Unit 3

• Simple Linear Regression and Correlation

• Multiple Linear Regression

Topics

Unit 3
• 1 Linear Regression and Correlation
• 2 Multiple Regression

1
Review: Linear Regression and Correlation

• Correlation analysis
– Scatter plot
– Correlation coefficient
• How to test its significance
– Coefficient of determination
• Simple linear regression
– Assumptions
– Estimation and interpretation
– Standard error of estimate
– Relationships among various measures

Activity 5.1: Simple Linear Regression

The sales manager of Copier Sales of America, which has a large sales
force throughout the United States and Canada, wants to determine
whether there is a relationship between the number of sales calls made
in a month and the number of copiers sold that month. The manager
selects a random sample of 10 representatives and determines the
number of sales calls each representative made last month and the
number of copiers sold (see Activity5.1_Dataset).

2
Activity 5.1 Cont’d
Using Excel,
1. Plot the scatter diagram. Does it appear there is a linear
relationship between the number of copiers sold in a month and
number of sales calls made that month?
2. Find the correlation coefficient
3. Determine at the 0.05 significance level whether the correlation
in the population is equal to zero.
4. Determine the estimated regression equation

You may refer to “Excel Self Practice Prior Seminar 5” Practice 3.1.

Review: Multiple Regression

• From simple regression to multiple regression

• Assumptions about multiple regression
• Multiple standard error of estimate
• ANOVA table
• Hypothesis testing
– Global test (F-test)
– Evaluating individual coefficients (t-test)

3
Activity 5.2: Multiple Linear Regression
Salsberry Realty sells homes along the east coast of the United States.
One of the questions most frequently asked by prospective buyers is: If
we purchase this home, how much can we expect to pay to heat it during
the winter? The research department at Salsberry has been asked to
develop some guidelines regarding heating costs for single-family homes.

Four variables are thought to relate to the heating costs ($): (1) the mean
daily outside temperature (ºF), (2) the insulation in the attic (inches), (3)
the age of the furnace (years) and (4) whether the house has a garage
(“0” for No and “1” for Yes).

To investigate, Salsberry’s research department selected a random

sample of 20 recently sold homes (see Activity5.2_Dataset).

Activity 5.2 Cont’d

In groups of 4, generate the relevant Excel reports and answer the following
questions:

a.Using scatter plots for the dependent variable vs each independent variable,
comment on the relationship based on the plots.

b.Estimate the multiple regression equation using all four independent variables.
Interpret the coefficients of each independent variable.

c. Determine the adjusted coefficient of multiple determination and explain its

meaning.

d.Conduct a global hypothesis test to determine if at least one regression

coefficient is non-zero.

e.Conduct a hypothesis test for each of the four independent variables to determine
which, if any, should be dropped from the model.

You may refer to “Excel Self Practice Prior Seminar 5” Practice 3.2.

4
Break

Take this opportunity to network with your classmates.

Activity 5.3: Residual Analysis

Continue with the same case study in Activity 5.2, in groups of four:

a. List down the assumptions for Multiple Linear Regression Model.

b. Using Excel, discuss whether these assumptions are reasonable.

You may refer to “Excel Self Practice Prior Seminar 5” Practice 3.3.

5
Thank You