Presentation on theme: "BA 275 Quantitative Business Methods"— Presentation transcript:
1 BA 275 Quantitative Business Methods AgendaQuiz #6Multiple Linear RegressionAdjusted R-squaredPrediction
2 Simple Linear Regression Model populationTrue effect of X on YEstimated effect of X on YsampleKey questions:1. Does X have any effect on Y?2. If yes, how large is the effect?3. Given X, what is the estimated Y?
3 Key Q1: Does X have any effect on Y. Key Q2: How large is the effect Key Q1: Does X have any effect on Y? Key Q2: How large is the effect? Key Q3: Predict Y for a given X.b0b1SEb1SEb0
4 Prediction and Confidence Intervals Prediction intervalConfidence interval
5 Model Comparison: A Good Fit? SS = Sum of Squares = ???
6 Residual AnalysisThe three conditions required for the validity of the regression analysis are:the error variable is normally distributed.the error variance is constant for all values of x.the errors are independent of each other.How can we diagnose violations of these conditions?Residual:
7 Residuals, Standardized Residuals, and Studentized Residuals
18 Questions Write down the fitted model. Is the assumed model reliable? Why?What is the value of R2? the adjusted R2? To select a model, why do we prefer adj-R2 to R2?Predict the amount of money withdrawn from a neighborhood in which the median value of homes is $200,000 for an ATM that is located in a shopping center.If the median value of homes increases by $2,000, then the amount of money withdrawn from an ATM located in a shopping center is expected to increase byIf the median value of homes is $200,000, then the amount of money withdrawn from an ATM located in a shopping center is ???; and the amount of money withdrawn from an ATM located outside a shopping center is ???. What is the difference?
19 Two Lines with the Same Slopes but Different Intercepts