Statistics for Business and Economics, 9e, Global Edition (Newbold)

Chapter 12 Multiple Regression

1) The two regressions Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + ε and Y = β0 + β1X1 + β2X2 + ε were run
using a sample of 30 observations. Assume the SSE for the first regression is 298.4, and is 382.3 for the
second regression. Test H0 : β3 = β4 = 0 at α = 0.05. Interpret your results.

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:

Suppose you are interested in determining the factors that influence the time required to prepare a tax
return, and developed the model: Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + ε, where Y is the amount of time
(in minutes), X1 is the income of the individual (in thousands of dollars), X2 is the age of the individual,
X3 is the number of people living in the household, and X4 is a dummy variable that takes the value 1, if
the individual owns his or her own home. After interviewing 40 accountants, you get the following
results: = 17.2 + 3.8x1 - 1.04x2 + 2.15x3 + 15.1x4, = 5.3, = 0.13, = 0.33, = 1.51, = 4.7, SSR =

164.2, SSE = 200.7, and R2 = 0.45.

2) Test H0 : β1 = 0 against H1 : β1 ≠ 0 and interpret your result.

3) Test H0 : β3 = 0 against H1 : β3 ≠ 0 and interpret your result.
4) Test for H0 : β1 = β2 = β3 = β4 = 0 and interpret your result.

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:

Suppose you are interested in determining the factors that influence the time required to prepare a tax

return. You develop the model Y = β0 + β1X1 + β2X2 + β3 + β4X3 + β5X4 + β6(X1 ∙ X4) + ε, where Y is

the amount of time in minutes, X1 is the income of the individual (in thousands of dollars), X2 is the age
of the individual, X3 is the number of people living in the household, and X4 is a dummy variable that
takes the value 1 if the individual owns his or her own home. After interviewing 40 accountants, you

obtained = 17.2 + 0.38x1 + 1.04x2 - 0.04 + 2.15x3 + 0.11x4 - 0.22(x1 ∙ x4), = 5.3, = 0.13, = 0.33,

= 1.51, = 4.7, = 0.05, and = 0.07.

5) What are your alternative hypotheses regarding the individual coefficients in this model? Explain.
6) Test the hypothesis H0 : β3 = 0 and interpret your result.
7) Test the hypothesis H0 : β6 = 0 and interpret your result.

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:

A professor investigated some of the factors that affect an individual student's final grade in his course.
He proposed the multiple regression model Y = β0 + β1X1 + β2X2 + β3X3 + ε , where Y is the final mark
(out of 100), X1 is the number of lectures skipped, X2 is the number of late assignments, and X3 is the
mid-term test mark (out of 100). The professor recorded the data for 50 randomly selected students. The
computer output is shown below.

The regression equation is = 41.6 - 3.18x1 - 1.17x2 + 0.63x3.

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 Predictor Coefficient StDev t
Constant 41.6 17.8 2.337
x1 -3.18 1.66 -1.916
x2 -1.17 1.13 -1.035
x2 0.63 0.13 4.846
S = 13.74 R-Sq = 30.0%

ANALYSIS OF VARIANCE
Source of Variation df SS MS F
Regression 3 3,716 1,238.667 6.558
Error 46 8,688 188.870
Total 49 12,404

8) What is the coefficient of determination? What does this statistic tell you?
9) Does the data provide enough evidence to conclude that, at the 5% significance level, the model is
useful in predicting the final mark?
10) Does the data provide enough evidence to conclude that, at the 5% significance level, the final mark
and the number of skipped lectures are linearly related?
11) Does the data provide enough evidence to conclude that, at the 5% significance level, the final mark
and the number of late assignments are negatively linearly related?
12) Interpret the coefficient b3.

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:

As director of the local tourist board, you are interested in determining the factors that influence the hotel
occupancy rate in your city each month. Hotel occupancy can be measured as the percentage of available
hotel rooms that are occupied by paying customers. You develop the following model: Y = β0 + β1X1 +
β2X2 + β3X3 + β4X4 + ε, where Y is the hotel occupancy rate, X1 is the total number of passengers arriving
at the airport, X2 is a price index of local hotel room rates, X3 is the consumer confidence index, and X4 is
a dummy variable = 1 during the months of June, July, and August. You look at data from the past 36
months and obtain the following results: = 67.1 + 0.02x1 - 0.055x2 + 0.08x3 + 12.3x4, R2 = 0.67, = 58.3,
= 0.008, = 0.01, = 0.06, = 4.7, and SSE = 576.

13) What are your hypotheses regarding this model? Explain. Are there any other variables you would
have liked to include?
14) Interpret the estimated regression coefficient b4.
15) Test the hypothesis H0 : β1 = β2 = β3 = β4 = 0. Interpret your results.

16) The director of a local tourist board is interested in determining the factors that influence the hotel occupancy rate in his city
each month. Hotel occupancy can be measured as the percentage of available hotel rooms that are occupied by paying customers.
He develops two models: Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + ε and Y = β0 + β1X1 + β2X2 + ε, where Y is the hotel occupancy rate
(as a percentage), X1 is the total number of passengers arriving at the airport (measured in thousands), X2 is an average of local
hotel room rates, X3 is the consumer confidence index, and X4 is a dummy variable = 1 during the months of June, July and August.
He looks at data from the past 36 months and runs both of the regressions above. The results of these regressions are as follows:
Model 1: R2 = 0.67 and SSE = 576, Model 2: R2 = 0.61 and SSE = 733. Using the F- test on a subset of variables, test whether β3 = β4 =
0.

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THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
The model y = β0 + β1X1 + β2X2 + ε was fitted to a sample of 25 families in order to explain household
milk consumption: where y = Milk consumption, in quarts, per week, x1 = Weekly income, in hundreds of
dollars, and x2 = Family size. The least squares estimates of the regression parameters were b0 = -0.03, b1 =
0.05, and b2 = 1.1, with coefficient standard errors = 0.02; = 0.38. The total sum of squares and the
error sum of squares were found to be 165.8 and 66.32 respectively.

17) Find and interpret the coefficient of multiple correlation.

18) Test against the appropriate one-sided alternative, the null hypothesis that, for fixed family size, milk
consumption does not depend linearly on income. Use α = 0.025.
19) Find 95% confidence interval for β1.
20) For a fixed weekly income, test the null hypothesis that milk consumption does not depend linearly
on the size of the family against an appropriate one-sided alternative. Use α = 0.025.
21)
Source of variation SS df MS F-ratio
Regression 99.48 2 49.74 16.5
Error 66.32 22 3.0145
Total 165.8 24
Test the hypothesis H0 : β1 = β2 = 0 against H1 : At least one βj ≠ 0,(j = 1, 2) at the 1% significance level.

22) For the regression model i = b0 + b1x1i + b2x2i, the following summary statistics are given:
r y = 0.58; r y = -0.50; r = -0.58; s = 180; s = 90; and sy = 360.
23) Compute the coefficient b1.

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:

In a study of foreign holdings in Egyptian banks, the following sample regression results were obtained,
based on 14 annual observations: = -3.25 + - + , and R2 = 0.92,

Where the numbers in parentheses under the coefficient estimates are the estimated coefficient standard
errors, and
y = Year-end share of assets in Egyptian bank subsidiaries held by foreigners, as a percentage of total
assets
x1 = Annual change, in billions of Egyptian pounds, in foreign direct investment in Egypt
x2 = Bank price-earnings ratio
x3 = Index of the exchange value of the Egyptian pounds

24) Find a 95% confidence interval for β1.

25) Test the null hypothesis that β1 is zero, against the alternative that it is positive at the 5% significance
level and interpret your result.

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