3.

4 Exercises 103

Draw a scatter plot of the data

Fit a model based on subject matter expertise

and/or observation of the scatter plot

Assess the adequacy of the model in particular:

Is the functional form of the model correct?
Do the errors have constant variance?

YES NO

Do outliers and/or leverage Add new terms to the model

points exist? and/or transform x and/orY

NO YES
Is the sample size large?
Are the outliers and leverage
YES NO points valid?

Based on Analysis of NO
Variance or a t-test Are the errors
YES Remove them
decide if there is a YES normally dis-
and refit the
significant association tributed?
model
betweenY and x?
NO
YES NO
Consider
Use the boot-
modifications
strap for in-
Use the final to the model
ference
model to form Stop!
confidence
intervals

Figure 3.40 Flow chart for simple linear regression

3.4 Exercises

1. The data file airfares.txt on the book web site gives the one-way airfare (in US dol-
lars) and distance (in miles) from city A to 17 other cities in the US. Interest centers
on modeling airfare as a function of distance. The first model fit to the data was

Fare = b 0 + b1 Distance + e (3.7)

(a) Based on the output for model (3.7) a business analyst concluded the
following:
The regression coefficient of the predictor variable, Distance is highly statistically signifi-
cant and the model explains 99.4% of the variability in the Y-variable, Fare. Thus model
(1) is a highly effective model for both understanding the effects of Distance on Fare and
for predicting future values of Fare given the value of the predictor variable, Distance.