Regression Analysis Questions - Assignment Example

Download file to see previous pages The explanatory variable is the scale upon which the dependent or the response variable changes, for instance time. The constant represent the unwavering value in the regression equation, for instance, fixed costs.
An example of a multiple regression would be = mX + nZ, which is an equation to calculate profit for a company. The variable Y would be for profit margin, X for fixed costs and Z for variable costs. The values of m and n are the coefficients of X and Z respectively. The value of m would tell of the rate of change in slope attributable to X while n would show the rate of change of slope attributable to Z.
By assuming that the impacts of the other two components, which make 20% of the total sales are negligible, the error value increases significantly. In addition, since items B and C form part of the error, and will change with varying values of A, the model with be heteroscedastic, hence more difficult to use for the underlying trend in the data. Consequently, a linear model would make a poor fit for the data. Therefore, this use of regression analysis would be ...Download file to see next pagesRead More