MOREHEAD STATE UNIVERSITY ECON/MNGT 300 Quantitative Methods for Business and Economics Exam Two- Simple Regression-

Summer 2013

NAME_Brittany McKnight

Dr. Ali Ahmadi

Using the following table of relation between X & Y (Y is the independent Variable): xi yi 1 8 2 7 3 7 4 6 5 4 6 4 7 1

a.

Find the estimated regression equation. Show ALL your calculations and the appropriate formula. WRITE Formula in all the questions below and substitute for the numbers, demonstrate your work.

x 1 2 3 4 5 6 7 28

y 8 7 7 6 4 4 -1 35

xy 8 14 21 24 20 24 -7 104

x 1 4 9 16 25 36 49 140

y 64 49 49 36 16 16 1 231

Slope (b) = (NXY - (X)(Y)) / (NX2 - (X)2) = (7*104 (28) (35))/ (7 (140) - (28)2) = -1.29 Intercept (a) = (Y - b(X)) / N = (35 (-1.29)*28)/7 = 10.14 The regression equation is Y= 10.14 1.29X

b.

Calculate R2. Comment on the Goodness of the Fit. Is it a good fit? Why? r = NXY - (X) (Y) / ([NX2 - (X)2][NY2 - (Y)2]) = 7(104) - (28)(35) /([7 (140) - (28)2][(7)(231) - (35)2]) = 0.909 R2 = (0.909)^2 = 0.827

Since r-square is close to 1, it is considered to be a good fit.

c.

Test the hypothesis regarding the significance of the slope 1 . (Use = 0.05) Show ALL the calculations necessary to get your answer. Null Hypothesis (Ho): 1 = 0 Alternative Hypothesis (Ha): 1 0 Test Statistics t = (b1 1)/Se (b) = (-1.29 0)/0.263 = -4.88 Degrees of freedom, df = n 2 = 7 2 = 5 Using t-tables, the critical value is t (0.05, 5) = 2.571 Since test statistics lie outside the critical values, we reject the null hypothesis. There is sufficient evidence to conclude that the slope is significant.

d.

Calculate the values of F, using formula for F statistics. Is F significant? Explain how you know.

F = MS (regression)/ MS (residual) = 46.28571/1.942857 = 23.82353

P-value = 0.004549 Since p-value is very small, we can conclude that F is significant.

e.

Perform the Regression above in Excel and paste the Print Out in a separate page within this same file.

SUMMARY OUTPUT Regression Statistics Multiple R 0.909137 R Square 0.826531 Adjusted R Square 0.791837 Standard Error 1.393864 Observations 7 ANOVA df Regression Residual Total 1 5 6 SS MS F 46.28571 46.28571 23.82353 9.714286 1.942857 56 Standard Error t Stat P-value 1.17803 8.610015 0.000349 0.263416 -4.88094 0.004549 Significance F 0.004549

Intercept X Variable 1

Coefficients 10.14286 -1.28571

Upper Lower 95% 95% 7.114634 13.17108 -1.96285 -0.60858

SUMMARY OUTPUT Regression Statistics Multiple R 0.93823935 R Square 0.88029308 Adjusted R Square 0.87399271 5.34369257 Standard Error 5 Observations 21 ANOVA df Regression Residual Total 1 19 20 SS 3989.739758 542.5459565 4532.285714 Standard Error 2.388863398 0.075488592 MS 3989.73975 28.5550503 F 139.720984 Significance F 3.34117E-10

Intercept X

Coefficients -1.35883303 0.89230257

t Stat -0.5688198 11.8203631

P-value 0.57614107 3.341E-10

a. What is the estimated regression equation?.

The estimated regression equation is Y = -1.359 + 0.892X

b. Using the formula from the Formula Sheet, and relying on information provided in this Excel print out, calculate R2. Comment on the Goodness of the Fit. Is it a good fit? Why?

R-square = 0.880 Since r-square is close to 1, it is considered to be a good fit.

c. Test the hypothesis regarding the significance of the slope 1. (Use = 0.05) Show ALL the calculations necessary to get your answer. In other words, is it significant? Give your answer by relying on BOTH the p-value and the t-table (Use = 0.05). EXPLAIN how you get your answer. Why is it significant? Answer:

Null Hypothesis (Ho): 1 = 0 Alternative Hypothesis (Ha): 1 0 Test Statistics t = (b1 1)/Se (b) = (0.892 0)/0.075 = 11.82 Degrees of freedom, df = n 2 = 21 2 = 19 Using t-tables, the critical value is t (0.05, 19) = 2.093 Since test statistics lie outside the critical values, we reject the null hypothesis. P-value = 0.000 Since p-value is less than 0.05, we reject the null hypothesis. There is sufficient evidence to conclude that the slope is significant.

d. Verify the values of F (which is already in the table) using formula for F statistics. Is F significant? Explain how you know.

F = MS (regression)/ MS (residual) = 3989.73975/28.5550503 = 139.720984 P-value = 3.34117E-10 Since p-value is very small, we can conclude that F is significant.