Relationship between SCT, SCR and SCE

(14.11)
Coefficient of determination
(14.12)
Sample correlation coefficient
(14.13)
_ _ b0 and B1x
b1 _
_ (X _ x) (y _ y)
_ (_ Xi x) 2
and b0 _ _ b1x
E (y) _ _ _0 _1x
and _0 _ _ _ _ _1x
606 Chapter 14 Simple Linear Regression
SCE_ _ (_ yi yi) 2
STC_ _ (_ yi y) 2
SCR_ _ (_ yi y) 2
SCR + STC = SCE
r2_
SCR
STC
rxy _
_
(Sign b1) determination _Coeficiente
(Sign b1) _r 2
min (yi yi) 2
Mean square error (estimation 2)
(14.15)
Standard error of estimate
(14.16)
Standard deviation b1
(14.17)
B1 estimated standard deviation
(14.18)

Test statistic t
(14.19)
Mean square regression
(14.20)
Test statistic F
(14.21)
Estimated standard deviation and p ^
(14.23)
Confidence interval for E (p)
(14.24)
Estimated standard deviation for a single value
(14.26)
Prediction interval for p
(14.27)
Residual observation i
and (14.28) i _ i
p _ t / 2sind
s_1 sind _ _
1
n
_
(Xp _ x) 2
_ (_ Xi x) 2
p _ t / 2syp
SYP
_ S_1
n
_
(Xp _ x) 2
_ (_ Xi x) 2
t_
b1
sb1
sb1

_
s
__ (_ Xi x) 2
b1
_

__ (_ Xi x) 2
Key formulas 607
s2 _ ECM_
SCE
n_2
s _ _ _ SCE _CME
n_2
CMR_
SCR
Number of independent variables
F_
CMR
CME
Residual standard deviation of i
(14.30)
Residual standardized observation i
(14.32)
Observing bias
(14.33)
Supplementary Exercises
55. If the value of r2 is high, that means that between the two variables
there is a cause
and effect?
56. Explain in your own words the difference between interval estimate of
the mean value
the and xy for a given interval estimate a value of y for a given x value.
57. What is the purpose test whether _1 = 0? If it rejects _1 = 0, that
means a good fit?
58. The following table shows the number of shares sold (million) and
given the expected price (the

average minimum price and maximum price) 10 shares IPO.

hi _
1
n
_
(Xi _ x) 2
_ (_ Xi x) 2
_ yi yi
syi_yi
syi_yi
_1 _ _ S hi
608 Chapter 14 Simple Linear Regression
Share Price
Company sold expected ($)
American Physician 5.0 15
Apex Silver Mines 9.0 14
Dan River 6.7 15
Franchise Mortgage 8.75 17
Gene Logic 3.0 11
International Home Foods 13.6 19
PRT Group 4.6 13
Rayovac 6.7 14
RealNetworks 3.0 10
Software AG Systems 7.7 13
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IPO
a. Get the regression equation estimated that the number of shares sold is
the independent variable and the dependent variable price.
b. Using 0.05 level of significance, is there a significant relationship
between the two
variables?
c. Does it provide the estimated regression equation a good fit? Explain.
d. Using the estimated regression equation, estimate the expected price
in a company

consider an initial public offering of 6 million shares.

59. repurchase programs corporate actions, often promoted as a benefit
to
shareholders. But Robert Gabele, director of domestic research at First
Call / Thomson Financial,
He noted that many of these programs are performed solely for the
purpose of obtaining
actions that are used as options as an incentive for senior managers of
the
company. In all companies, existing stock options in 1998 accounted for
6.2
percent of all shares outstanding. In the following you are given quantity
of options granted and the amount of outstanding shares of 13 companies
(Bloomberg Personal
Finance, January / February 2000)
a. Get an estimated regression equation that serves to estimate the
amount outstanding
Options granted given the number of common shares outstanding.
b. Use the estimated regression equation to estimate the number of
options outstanding
granted by a company that has 150 million common shares outstanding.
c. Do you think the estimated regression equation provide a good
prediction of the amount
outstanding options granted? R2 use to justify your answer.
60. The Dow Jones Industrial Average (DJIA) and the Standard & Poor's 500
(S & P) are indices
used as a measure of overall market movement. The DJIA is based on
movements in prices of 30 large companies; the S & P 500 is a composite
index
500 shares. Some say the S & P 500 is a better measure of market activity
value because it has a wider base. Following the closing price comes
DJIA and the S & P 500 for 20 weeks from September 9, 2005 (Blur's 30
January 2006).
Supplementary Exercises 609
Common stock options granted
currency in circulation
(In millions) (in millions)
Adobe Systems 20.3 61.8

Apple Computer 52.7 160.9

Applied Materials 109.1 375.4
Autodesk 15.7 58.9
Best Buy 44.2 203.8
Fruit of the Loom 14.2 66.9
ITT Industries 18.0 87.9
Merrill Lynch 89.9 365.5
Novell 120.2 335.0
Parametric Technology 78.3 269.3
Reebok International 12.8 56.1
Silicon Graphics 52.6 188.8
Toys "R" Us 54.8 247.6
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Options
Date DJIA S & P 500
September 9 10 679 1241
September 16 10 642 1238
September 23 10 420 1215
September 30 10 569 1229
October 7 10 292 1196
October 14 10 287 1187
October 21 10 215 1180
October 28 10 403 1198
November 4 10 531 1220
November 11 10 686 1235
November 18 10 766 1248
November 25 10 932 1268
December 2 10 878 1265
December 9 10 779 1259
December 16 10 876 1267
December 23 10 883 1269
December 30 10 718 1248
January 6 10 959 1285

January 13 10 960 1288

January 20 10 667 1261
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DJIAS & P500
a. Give scatterplot of these using DJIA as an independent variable data.
b. Obtain the estimated regression equation.
c. Try the significance of the relationship. Use = 0.05.
d. Does it provide a good fit the estimated regression equation? Explain.
e. Suppose the DJIA closing price is 11 000. Estimate the closing price of
the S & P 500.
f. You should worry that the value of the DJIA 11 000 employee in
subsection e) to predict
the S & P 500 is outside the range of the data used to derive the equation
estimated regression?
61. Jensen Tire & Auto is about to decide whether to sign a maintenance
contract for your new machine
alignment and balancing tires. Managers believe that maintenance costs
They must be related to the use and collect the following data on weekly
use
(Hours) and annual maintenance (hundreds of dollars).
610 Chapter 14 Simple Linear Regression
Weekly usage costs
(Hours) Annual maintenance
13 17.0
10 22.0
20 30.0
28 37.0
32 47.0
17 30.5
24 32.5
31 39.0
40 51.5
38 40.0
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Jensen
a. Obtain the estimated regression equation that relates annual
maintenance
with weekly use.
b. Try the significance of the relationship of subsection a) with 0.05 level
of significance.
c. Jensen thinks it will use the new machine 30 hours a week. Get a range
of
95% prediction for annual maintenance expenses of the company.
d. If the contract price is $ 3,000 annual maintenance, would you
recommend the contract
Maintenance? Why or why not?
62. In a particular manufacturing process is believed to speed (fpm) line
assembly affected the number of defective parts found in the inspection
process. To
try this, administrators devised a procedure in which the same number of
parts
Batch is visually examined at different line speeds. We collected the
following information.
Number of parts
Speed line found defective
20 21
20 19
40 15
30 16
60 14
40 17
a. Obtains the estimated regression equation that relates velocity of the
production line
with the number of defective parts found.
b. Using the 0.05 level of significance, determine if the line speed and the
number
of found defective parts are related.
c. Does the estimated regression equation fits well to the data?
d. Give a confidence interval of 95% to predict the average number of
defective parts
if the line speed is 50 feet per minute.

63. A large hospital in a city hired a sociologist to investigate the

relationship between
the number of days per year absence with permission, and the distance (in
miles) from the house
and the employee's work. a sample of 10 employees was taken and the
following data was obtained.
Supplementary Exercises 611
Distance to work Number of days absent
August 1
May 3
August 4
July 6
June 8
March 10
May 12
February 14
April 14
Feb. 18
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Absent
a. Develop, with these data, a scatterplot.
b. Get equation least squares regression.
c. Is there a significant relationship between the two variables? Explain.
d. Does it provide the estimated regression equation a good fit? Explain
e. Use the estimated regression equation obtained in part b) to calculate
an interval
the 95% to the expected number of absences (days) of employees
live within five miles of the company.
64. The transit authority of a major metropolitan area wants to determine
whether there is a relationship