Statistics 401 Mod 4 Case - Regression Analysis - Coursework Example

In some cases, the scattered plotted points do form a pattern that resembles a straight line. These points all scatter around single straight line which is termed as the line of best fit. On drawing the line of best fit, it has a linear equation of the form y= mx + c. The equation can be used to predict the corresponding values of the X- variables or the Y- variable given the values of the Y- variables or the X- variables respectively. I inserted the data in the excel file in an effort to compute a scatter plot.

By so doing, I made X to be the interest rate expressed as a decimal (e.g., 5% = 0.05). At the same time, I made Y to be the Housing Starts. This led to a scatter plot as shown in the graph below. It The regression equation that I computed as shown in the graph is:- y = 13357x – 12607 This is a linear equation or an equation of the straight line. The equation does indeed have the form Y = m*X + B, were Y is the number of starts, and B is the regression constant. B is the hypothetical value of Y when X = 0.

  In accordance to the nature of this problem, It sure does make a practical sense. The equation is very useful in making predictions of the corresponding values of the variables given the other corresponding piece. . The fact that the scatter plot so formed has a line of best fit with a linear equation confirms that indeed there is a relationship between the Housing stats and the interest rates. Given one of the values, the corresponding value can be easily predicted using the shared relationship.

I Used the regression equation found above to calculate what the approximate number of housing starts would be at the following interest rates: 8.5%, 4.5%, 3.7%, 2.3%. This is sown in the computations below. I understood perfectly that I would not simply "guess" values, based on the historical data that was given.  That is clearly wrong. I also understood that I ought not have used linear interpolation between the historical data values; that's also wrong. I saw to it that I rounded off estimates of starts to the nearest whole number.

  This is because a house-building project either starts in a given month, or it doesn't.  Therefore, it makes no sense to talk about fractions of a start. X= 8.5 = 0.0885 y = 13357x - 12607 =(13357*8.85) – 12607 = 105602.45 = 105602 X= 4.5 = 0.045 y = 13357x – 12607 =(13357*4.5) – 12607 = 47499.5 = 47499 X= 3.7 = 0.037 y = 13357x - 12607 =(13357*3.7) – 12607 = 36813.9= 36813 X= 2.3 = 0.023 y = 13357x - 12607 =(13357*2.3) – 12607 = 18114.1 = 18114 If I were the owner of a business in the housing construction sector and I knew how interest rates were likely to change, I would use this information very effectively to make better decisions.

The housing construction sector is a business venture where the risks involved are rather very huge. It involves the investment of a lot of money and this puts the investor in a lot of danger of losing a large sum of money all at once. This calls for a proper