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RESEARCH METHODS

ANALYSIS OF QUANTITATIVE DATA FOR RESEARCH


Dr Kwaku Ohene-Asare & Mr. Abeeku E. Edu
Website:https://sakai.ug.edu.gh/portal
Email:kohene-asare@ug.edu.gh; asedu@ug.edu.gh
The University of Ghana Business School, Dept of OMIS

Feb-Apr, 2016
Defeat is not bitter unless you swallow it. - Joe Clark

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Welcome

Welcome to the journey through the valley of the


shadows of multivariate data analysis
"A little learning is a dang'rous thing; Drink deep, or
taste not the Pierian spring." Alexander Pope

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Announcements

Lectures:
cuts across, UG, MBA, EMBA, WMBA

Oce
Surgery hours
Website

: UGBS, Roof Top, Room 16


: By appointment

: sakai https://sites.google.com/site/oasare/

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Grading Policy

Final Examination 35%


Group assignments & IAs 10%
Class Partipation 5%

Total 50%

My teaching style is interactive

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Strategies for Success

Be of good courage! You can master this material!!


Some defeat themselves. No!!! Be positive.
Let me know what is & what isn't working for you
Put in the time, eort & energy! You can pass!!!
Anywhere is a walking distance if you have time

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Session 1 Overview

Denition
Data is a collection of observations
This session seeks to explain the dierence between categorical
and numerical data, distinguish among nominal, ordinal, interval
and ratio scale of measurement and provide examples for each.

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Session 1 Outline

The key topics to be covered in the session are as follows:


Categorical/Qualitative Data
Numerical/Quantitative Data
Scales of measurement

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Reading List
of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Pages 40 - 45 of Lane, D. (2003). Online Statistics Education: A
Multimedia Course of Study. In D. Lassner & C. McNaught (Eds.),
Proceedings of World Conference on Educational Multimedia, Hypermedia
and Telecommunications 2003 (pp. 1317-1320). Chesapeake, VA:
Association for the Advancement of Computing in Education
(AACE).Retrieved January 28, 2015 from http://www.editlib.org/p/14001
Chapter 1 - 3

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Data (1)

Before undertaking a specic quantitative research,


data must be obtained. The data type and the scale of
measurement help relate the type of statistics the
analyst can use to examine the data.

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Data (2)

The scale of measurement determines the amount of


information contained in the data & indicates the most
appropriate data summarization & statistical analyses

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Categorical Data

A data is categorical if the observation in it can be grouped into


categories

An observation is from a set of non-overlapping categories


Selecting a bad category can mess the research outcome
2 levels of measurement exist under categorical data

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Categorical Data - Nominal

When the data for a variable consist of

labels

or

names

used to

identify an attribute of the element, the scale of measurement is


considered a nominal scale
There is no intrinsic order

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Nominal Data Examples

Sex, Employment, Marital Status, Gender


In a dataset, males could be coded as 0, females as 1. Here, the
scale of measurement is still nominal even though the data
appear as numeric value. Why?
Martial status could be coded as D if divorced, M if married, S if
single, & W if widowed. Order is useless.

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Categorical Data - Ordinal

The measurement scale for a data is ordinal if the data exhibits


the properties of nominal data & the order or rank or rating of
the data is meaningful
Ranking could be done in ascending or descending order. e.g.
attitudes on a likert scale

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Ordinal Data Examples

Your class rank in school (can be coded): excellent, good & then
poor
Such responses to questions coded from a scale of 1 to 5 as
strongly dislike, dislike, neutral, like & strongly like
Here, what does the rating of 5 indicate?

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Levels of Measurement

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Numerical Data - Interval

A variable is an interval scale if the data have all the properties


of ordinal data & the interval between values is expressed in
terms of a xed unit of measure.
Scores on an interval scale can be added and subtracted but can
not be meaningfully multiplied or divided. Always numeric.

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Interval Data Examples

Dierence between a temperature of 100 degrees & 90 degrees is


the same dierence as between 90

& 80

3 students with SAT math scores of 620, 550, & 470 can be
ranked or ordered in terms of best performance to poorest
performance.

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Numerical Data - Ratio

A data is ratio if the values/observations belonging to it may


take on any value within a nite or innite interval.
They are numeric variable with absolute (non-arbitrary) 0. You
can count, order and measure

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Ratio Data Examples

income, amount of sugar in an orange


number of employees, age
distance, height, weight
time needed to run a mile

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Measurement Levels: Summary

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Class Exercise 1
Identify the type of data & measurement scale described in each
of the

following

examples.

An opinion poll was taken asking people which party they would
vote for in a general election.
A market researcher stops you in Spintex Road and asks you to
rate between 1 (disagree strongly) and 5 (agree strongly) your
response to opinions presented to you.
Incomes of Ghanaians musicians.

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Class Exercise 2

The Wall Street Journal (WSJ) subscriber survey (October 13,


2003) asked 46 questions about subscriber characteristics and
interests. State whether each of the following questions provided

categorical numerical
or

data and indicate the measurement

scale appropriate for each.

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Solution to Exercise 2 (1)

What is your age?


numerical &
ratio
Are you male or female?
categorical &
nominal

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Solution to Exercise 2 (2)


When did you rst start reading Daily Graphic? High school,
college, early career, midcareer, late career, or retirement?
categorical &
ordinal
How long have you been in your job or position?
numerical &
ratio

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Solution to Exercise 2 (3)

What type of car do you want to next buy? 9 responses included


bmw, benz, toyota, hyundai, ford etc.
categorical &
nominal

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Solution to Exercise 2 (4)

What grade did you get in research methods? Is it A, F, D, B+


or B?
categorical &
ordinal

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Practice Questions (1)

Foreign Aairs

magazine conducted a survey to develop a prole

of its subscribers (Foreign Aairs website, February 23, 2008).


The following questions were asked. Comment on whether each
question provides categorical or quantitative data and indicate
the level of measurement.

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Practice Questions (2)

How many nights have you stayed in a hotel?


Where do you purchase books? Three options were listed:
Bookstore, Internet, and Book Club.
Do you own a car?
For foreign trips taken in the past three years, what was your
destination? Seven international destinations were listed.

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Session 2 Overview

Whether in our personal conversations, business life or academic


research, we usually make a tentative assumption about the
whole. But making a statement is one thing. Testing its
authenticity is another thing.
This session examines the tools needed to hypothesize &
conclude given there is only 1 sample.

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Session 2 Overview

null & alternative hypotheses


t-test statistic, critical value, p-value
level of signicance
statistically & practical signicance

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Reading List
of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Pages 344-379 of Lane, D. (2003). Online Statistics Education: A
Multimedia Course of Study. In D. Lassner & C. McNaught (Eds.),
Proceedings of World Conference on Educational Multimedia, Hypermedia
and Telecommunications 2003 (pp. 1317-1320). Chesapeake, VA:
Association for the Advancement of Computing in Education
(AACE).Retrieved January 28, 2015 from http://www.editlib.org/p/14001
Chapter 9

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What is a hypothesis?

A statement, claim or assumption about a population parameter


such as the average, variance, standard deviation
A hypothesis can be a statement or a question:
Income has a positive eect on consumption
Are socially responsible rms are more protable?

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STEPS in Hypothesis Testing


1 Write null

H0

& alternative

Ha

hypotheses

2 Compute the test statistic, i.e. the calculated value


3 Find the critical value, (i.e. tabulated value) from the table using
the degrees of freedom (d.f.)

4 Find the p-value using the calculated value


5 Compare the
6 Compare

calculated vs. tabulated . Reject


p value vs. . Reject H0 if p <

H0 if

cal > tab

7 Conclude both statistically & practically!


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What is the null hypothesis Ho ?


The

H0

is the populative, authoritative statement put forward by

a maker (or inventor, researcher etc) either because it is believed


to be true or because it is to be used as a basis for argument, but
has not been proved.
e.g. in a clinical trial of a new drug,

H0

might be: new drug is

no better, on average, than the current drug.i.e.

H 0:

there is no

dierence between the 2 drugs on average.

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What is the alternative hypothesis Ha?

Ha

is the alternative, opposite statement which reects that

there will be an observed eect for our trial.

Ha

is more or less, the direct mirror image of

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H 0.

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Key note about the Ha

At times, the statement given in the story is already in the

Ha

alternative format (

).

.
And you have to write the

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

Ha

before knowing the

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H0

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Tail of test
The form of

Ha

can be either one-tailed or two-tailed.

Indicators of one-tailed test: or > & or

<

greater than, below, beyond, not fewer than,not above,


better than, worse than, at least, at most, not at least,
not younger than, above.

Indicators of two-tailed test: = or

6=

not equal to, not dierent from, diers from, the same as,
does not vary from, on, of , was.

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Sign for one-tailed test


Lower Tail Test

H 0 : H
Ha : <H
Upper Tail Test

H 0 : H
Ha : >H

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Let's nd the H0 & Ha in the  statements


Nescafe Ghana claims that since the population mean lling
weight is at least 3 lb/can, consumers' rights are protected.

H 0 : 3
Ha : <3
MaxFlight uses a high-technology manufacturing process to
produce golf balls with a mean driving distance of 295 yards.
___________
___________

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Find the H0 & Ha (2)

According to the CEO, the new BMW car can run more than 24
miles per gallon
___________
___________

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Find the H0 & Ha (3)

Ghana Telecom manager thinks that customer monthly cell


phone bill average not at most Ghc52 per month.

H 0 : 52 average is not over Ghc52 per month


Ha : > 52 average is over Ghc52 per month

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Find the H0 & Ha (4)

The minimum wage in Ghana this 2015 is not at most GHc 6.


___________
___________

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Find the H0 & Ha (5)

Suppose that we want to test the hypothesis that the climate has
changed since industrializatoin. If the mean temperature
throughout history is not as improved as 50 degrees, what is the
null & alternative hypotheses?

H 0 : 50
Ha : > 50

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Session 3 Overview

We are ready to test the authenticity of claims or hypotheses.


The session demonstrates the process of hypothesizing, testing &
concluding given a single sample.

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Session 3 Outline

real life example: SME


t-test statistic
critical value, p-value
level of signicance,

statistically & practical signicance

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Reading List
Chap 9 of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Chap 16 Buglear, John, 2005, Quantitative Methods for Business: The A-Z
of QM
Chap 9 of Newbold, P., Carlson, W. & Thorne, B (2013) Statistics for
Business and Economics, 8/E, Pearson

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, & test statistic

The level of signicance

is the probability of making a Type I

error when the H0 is true as an equality.


Examples of

0.01 (1%), 0.05 (5%), or 0.10 (10%)

Compute the test statistic:

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t=

x
s


,

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z=

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z or t, df & critical value

Use

if sample is large (

30)

or

Determine the degrees of freedom:


Determine the critical value:

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< 30).

if sample is small (

df = n 1

tdf =,n1

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Compute p-value & compare

p-Value Approach

t calculated or z calculated
p value .
Reject H 0 if p value <
Use the

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to compute the

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Compute critical value & compare

Critical Value Approach

t test , use & df to nd


also called t tabulated .
For z , use only
Reject H 0 if t cal > t tab
Under

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the critical value,

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tdf =,n1

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Z or t? Decision Rule

Always reject the

Ho ,

if the calculated (test statistic) is >

tabulated (critical value).


This implies rejecting

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

Ho

when the

P value <

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t table
t Table
cum. prob
one-tail
two-tails
df
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
40
60
80
100
1000

.50

.75

.80

.85

.90

.95

.975

.99

.995

.999

.9995

0.50
1.00

0.25
0.50

0.20
0.40

0.15
0.30

0.10
0.20

0.05
0.10

0.025
0.05

0.01
0.02

0.005
0.01

0.001
0.002

0.0005

0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

1.000
0.816
0.765
0.741
0.727
0.718
0.711
0.706
0.703
0.700
0.697
0.695
0.694
0.692
0.691
0.690
0.689
0.688
0.688
0.687
0.686
0.686
0.685
0.685
0.684
0.684
0.684
0.683
0.683
0.683
0.681
0.679
0.678
0.677
0.675

1.376
1.061
0.978
0.941
0.920
0.906
0.896
0.889
0.883
0.879
0.876
0.873
0.870
0.868
0.866
0.865
0.863
0.862
0.861
0.860
0.859
0.858
0.858
0.857
0.856
0.856
0.855
0.855
0.854
0.854
0.851
0.848
0.846
0.845
0.842

1.963
1.386
1.250
1.190
1.156
1.134
1.119
1.108
1.100
1.093
1.088
1.083
1.079
1.076
1.074
1.071
1.069
1.067
1.066
1.064
1.063
1.061
1.060
1.059
1.058
1.058
1.057
1.056
1.055
1.055
1.050
1.045
1.043
1.042
1.037

3.078
1.886
1.638
1.533
1.476
1.440
1.415
1.397
1.383
1.372
1.363
1.356
1.350
1.345
1.341
1.337
1.333
1.330
1.328
1.325
1.323
1.321
1.319
1.318
1.316
1.315
1.314
1.313
1.311
1.310
1.303
1.296
1.292
1.290
1.282

6.314
2.920
2.353
2.132
2.015
1.943
1.895
1.860
1.833
1.812
1.796
1.782
1.771
1.761
1.753
1.746
1.740
1.734
1.729
1.725
1.721
1.717
1.714
1.711
1.708
1.706
1.703
1.701
1.699
1.697
1.684
1.671
1.664
1.660
1.646

12.71
4.303
3.182
2.776
2.571
2.447
2.365
2.306
2.262
2.228
2.201
2.179
2.160
2.145
2.131
2.120
2.110
2.101
2.093
2.086
2.080
2.074
2.069
2.064
2.060
2.056
2.052
2.048
2.045
2.042
2.021
2.000
1.990
1.984
1.962

31.82
6.965
4.541
3.747
3.365
3.143
2.998
2.896
2.821
2.764
2.718
2.681
2.650
2.624
2.602
2.583
2.567
2.552
2.539
2.528
2.518
2.508
2.500
2.492
2.485
2.479
2.473
2.467
2.462
2.457
2.423
2.390
2.374
2.364
2.330

63.66
9.925
5.841
4.604
4.032
3.707
3.499
3.355
3.250
3.169
3.106
3.055
3.012
2.977
2.947
2.921
2.898
2.878
2.861
2.845
2.831
2.819
2.807
2.797
2.787
2.779
2.771
2.763
2.756
2.750
2.704
2.660
2.639
2.626
2.581

318.31
22.327
10.215
7.173
5.893
5.208
4.785
4.501
4.297
4.144
4.025
3.930
3.852
3.787
3.733
3.686
3.646
3.610
3.579
3.552
3.527
3.505
3.485
3.467
3.450
3.435
3.421
3.408
3.396
3.385
3.307
3.232
3.195
3.174
3.098

636.62
31.599
12.924
8.610
6.869
5.959
5.408
5.041
4.781
4.587
4.437
4.318
4.221
4.140
4.073
4.015
3.965
3.922
3.883
3.850
3.819
3.792
3.768
3.745
3.725
3.707
3.690
3.674
3.659
3.646
3.551
3.460
3.416
3.390
3.300

0.000

0.674

0.842

1.036

1.282

1.645

1.960

2.326

2.576

3.090

0%

50%

60%

70%

80%
90%
95%
Confidence Level

98%

99%

99.8%

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RESEARCH METHODS (slide 53)

0.001

3.291

Feb-Apr, 2016

99.9%

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Getting t critical & p value from t table (1)

t calculated to get the p value for the test.


And use the df to nd the t tabulated .
For e.g., if t calculated = 2.66, to get the p value , scan
the body of the t-table for the 2.66
Always use the

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

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Getting t critical & p value from t table (2)

This corresponds to 2.660 leading to

p value

of 0.005 (read on

top. don't forget if it is one-tail or two-tail)


Do the same for the 1% & 10% for either two-tail or one-tail.

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Applied example 1
Suppose that you are thinking of taking over an SME. The
current owner claims the weekly turnover of each existing SME is
not dierent from

GH5000

and at this level you are willing to

take on the SME. You would be more cautious if the turnover is


below this gure. You examine the books of

26
GH4900

SMEs chosen at

random and nd that the average turnover was


standard deviation

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

GH280

with

. What would you do?

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Applied example 1 sol

= 5000, x = 4900, n = 26, = 280,


H0 : = 5000
Ha : 6= 5000

and

= 0.05,

Do you use t-stat or z-stat?

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Applied example 1 sol..

t=
t=

x
s
n

49005000
280

= 1.82

26

t calculated or t test statistic


the t tabulated (t-critical) & compare

This is the
Now, nd

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Applied e.g. 1 sol using critcal value


Ha ). Read df = n 1 &
= t25,0.05 = 2.060 is get t tabulated

Two-tail (see

tn1,

What is your conclusion?


As the
at 5%

t cal. of |1.82| is < t tab. of 2.06 we don't reject H0


& conclude that weekly turnover is GHc5000.

Nothing prevents you from buying the SME!!

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Applied e.g. 1 sol: using p-value


For

p value ,

use

t cal. = |1.82|.

Scan body of table, the

pool
Figure falls between 1.812 & 1.833
Either way, you get 0.1 (at the top) as its a two-tail

CONCLUDE
reject

H0

: As p-value of 0.1

>

t table .

alpha of 0.05 we do not

at the 0 05 signicance level.

Nothing prevents you from buying the SME!!

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Example 2: one sample test


Diwoeasem, a tomato grower has developed a new variety of
tomato. He claim that the average yield per plant is at least 4kg
of fruit. A gardening magazine tests this claim by growing some
plants, & measuring the yield, obtained 0.69 standard deviation
(see below). Does this data support Diwoeasem's claim?
Formulate the hypotheses. Use both the p-value and critical
value approaches.

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Example 2: one sample test..

3.6

4.2

3.8

2.7

4.0

4.8

2.7

3.9

4.2

4.5

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Example 2: Sol (hypotheses)

What are the hypotheses?? ____

H0 : 4kg
H0 : < 4kg

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Example 2: Sol (, z/t, tails)

Signicance level

= 5% = 0.05

Use 5% (default) even if alpha is not given


Which test is appropriate. . . .Why?
Is this a one tail or a two tail test?

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Example 2: Sol (compute)

= 5000, x = 4900, n = 26, = 280,


t = x
s

and

= 0.05

t=

3.844
0.69

= 0.73

10

This is the

t calculated

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

or

t test

statistic

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Example 2: Sol (critical value)

tn1, = t0.05,9 = 1.833


Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

is the

t tabulated

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Example 2: Sol (critical value & conclusion)

Since the

t statistic

of |0.73| is <

t critical

of 1.833 we

don't reject the H0 at the 5% signicance level.


Data strongly suggests that the true average yield is indeed at
least 4 kg.
Gardening magazine must support diwoeasem's claim.
Dierence of 4-3.84=0.16kg is just by chance.

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Example 2: Sol p-value approach


To nd the

p value ,

use

t cal. = |0.73|.

Search from

swimming pool of table


Falls between 0.727 & 0.741. What tail?
Either way, you get 0.25 (at the top), a one-tail.

CONCLUDE

p value = 0.25
5% sig. level.

: As

reject H0 at the

>=

0 05, we do not

True average yield is not below 4 kg of fruit.

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Practice Question 1

A shareholders' group, in lodging a protest, claimed that the


mean tenure for the CEO was not below 9 years. A survey of
companies reported in The Wall Street Journal found a sample

mean tenure of 7 27 years for CEOs with a standard deviation of

6 38 years (The Wall Street Journal, January 2, 2007).

And(pg357,28)

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Practice Question 1 cont...

1 Formulate the hypothesis that can be used to challenge the


validity of the claim made by the shareholders' group.

2 Assume 20 companies were included in the sample. What is

t tabulated & p value for your hypothesis test?


At = 1% , what is your statistical & practical conclusion
the

using

p-value & critical value approaches?

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Practice Question 2
A travel magazine wants to classify transatlantic gateway airports
using mean rating for the population of travelers. A scale with a
low score of 0 & a high score of 10 is used & airports with a
population mean rating above 7 will be designated as superior
airports. The magazine sta sampled 16 travelers at each
airport. The sample for London's Heathrow Airport provided a
mean rating of 7.25 with a standard deviation of 1.052. Should
Heathrow be designated as superior airport?

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RESEARCH METHODS (slide 71)

( = 10%).
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Practice Question 3
According to the label on packets of popcorns there should be 25
g of popcorns in every packet. The standard deviation of the
weight of popcorns per packet is known to be 2.2 g & the
weights are normally distributed. The mean weight of popcorns
in a random sample of 15 packets is 23.5 g. Test the hypothesis
that the information on the label is valid using a 1% level of
condence.

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Session 4 Overview
We extend the 1 sample/population analysis to a 2-sample study,
when the dierence between the 2 population means is
important. .
For example, we may want to test for the eect of customer
training workshop on the sales of salespersons in a company or
the impact of a reform in an industry. Policy prescriptions may
be oered based on the ndings.

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Session 4 Overview

hypotheses on dierence between 2 population means using


bivariate paired data
hypotheses on dierence between 2 population means using
independent samples
draw appropriate conclusions

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Reading List
Chap 10 of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Pages 344-379 of Lane, D. (2003). Online Statistics Education: A
Multimedia Course of Study. In D. Lassner & C. McNaught (Eds.),
Proceedings of World Conference on Educational Multimedia, Hypermedia
and Telecommunications 2003 (pp. 1317-1320).
Chap 17 Buglear, John, 2005, Quantitative Methods for Business: The A-Z
of QM
Chap 10 of Newbold, P., Carlson, W. & Thorne, B (2013) Statistics for
Business and Economics, 8/E, Pearson
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Two Sample Tests

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Parametric vs. Nonparametric tests


Parametric test

Nonparametric

One-sample t-test
Binomial
Paired t-test (dept)
Wilcoxon signed-rank test
Paired t-test (dept)
McNemar's Chi-square test
Independent t-test
Mann-Whitney U or Wil. ranksum
Pearson's correlation
Spearman's corr (xy)
Pearson's correlation
Kendall tau rank corr (xyz)
ANOVA (>2 indep. grps)
Kruskal-Wallis test
Repeated meas. ANOVA
Friedman Test, Cochran Q
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Paired/Dependent Samples

It is used to test the dierences between population means using


2 related/paired/matched/before & after samples
Population dierence =

Assumption: data or dierences

(d )

between paired values are

normally distributed

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Types of hypotheses for mean of population of dierences

H0
Ha
H0 : d = 0 Ha : d 6= 0 (not equal)
H0 : d 0 Ha : d > 0 (greater than)
H0 : d 0 Ha : d < 0 (less than)
Find tn1, =?? i.e. t-tabulated

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

RESEARCH METHODS (slide 79)

Type of test
Two-sided
One-sided
One-sided

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paired t-test for repeated samples


r
t=

d
S
d
n

Sd =

(dd)

n1

where

d = ndi mean of sample dierences


Sd = sample standard dev. of dierences
n = the sample size (number of pairs)

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Decision Rule

Reject
Reject
Reject
If

H0

H0
H0
H0

if
if
if

p value <
t calculated > t tabulated
t statistic > critical value

is rejected, there must be a signicant dierence (eect)

between 2 samples

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Matched Pairs Example 1


Assume you send your salespeople to a customer service
training workshop. Has the training made a dierence in the
number of complaints? You collect the following data:

t=
r

& Sd =

(dd)
n1

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

di
n
S
d
n

d
Sd / n

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Example 1: Sol, hypothesis

After - Before

H0 : d = 0, no dierence in No. of complaints; training is bogus


Ha : d 6= 0, training is eective/postive

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Example 1: Sol nd d & Sd

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Example 1: Sol nd d & Sd ..

Number of Complaints: (2) - (1)


Salesperson Before (1) After (2) Difference, di
C.B.
T.F.
M.H.
R.K.
M.O.

6
20
3
0
4

Dr K. Ohene-Asare & Mr. Abeeku E. Edu (UGBS)

4
6
2
0
0

- 2
-14
- 1
0
- 4
-21

d = ni
= - 4.2
Sd =

(d d)

n 1

= 5.67

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t table
t Table
cum. prob
one-tail
two-tails
df
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
40
60
80
100

.50

.75

.80

.85

.90

.95

.975

.99

.995

.999

.9995

0.50
1.00

0.25
0.50

0.20
0.40

0.15
0.30

0.10
0.20

0.05
0.10

0.025
0.05

0.01
0.02

0.005
0.01

0.001
0.002

0.0005

0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

1.000
0.816
0.765
0.741
0.727
0.718
0.711
0.706
0.703
0.700
0.697
0.695
0.694
0.692
0.691
0.690
0.689
0.688
0.688
0.687
0.686
0.686
0.685
0.685
0.684
0.684
0.684
0.683
0.683
0.683
0.681
0.679
0.678
0.677

1.376
1.061
0.978
0.941
0.920
0.906
0.896
0.889
0.883
0.879
0.876
0.873
0.870
0.868
0.866
0.865
0.863
0.862
0.861
0.860
0.859
0.858
0.858
0.857
0.856
0.856
0.855
0.855
0.854
0.854
0.851
0.848
0.846
0.845

1.963
1.386
1.250
1.190
1.156
1.134
1.119
1.108
1.100
1.093
1.088
1.083
1.079
1.076
1.074
1.071
1.069
1.067
1.066
1.064
1.063
1.061
1.060
1.059
1.058
1.058
1.057
1.056
1.055
1.055
1.050
1.045
1.043
1.042

3.078
1.886
1.638
1.533
1.476
1.440
1.415
1.397
1.383
1.372
1.363
1.356
1.350
1.345
1.341
1.337
1.333
1.330
1.328
1.325
1.323
1.321
1.319
1.318
1.316
1.315
1.314
1.313
1.311
1.310
1.303
1.296
1.292
1.290

6.314
2.920
2.353
2.132
2.015
1.943
1.895
1.860
1.833
1.812
1.796
1.782
1.771
1.761
1.753
1.746
1.740
1.734
1.729
1.725
1.721
1.717
1.714
1.711
1.708
1.706
1.703
1.701
1.699
1.697
1.684
1.671
1.664
1.660

12.71
4.303
3.182
2.776
2.571
2.447
2.365
2.306
2.262
2.228
2.201
2.179
2.160
2.145
2.131
2.120
2.110
2.101
2.093
2.086
2.080
2.074
2.069
2.064
2.060
2.056
2.052
2.048
2.045
2.042
2.021
2.000
1.990
1.984

31.82
6.965
4.541
3.747
3.365
3.143
2.998
2.896
2.821
2.764
2.718
2.681
2.650
2.624
2.602
2.583
2.567
2.552
2.539
2.528
2.518
2.508
2.500
2.492
2.485
2.479
2.473
2.467
2.462
2.457
2.423
2.390
2.374
2.364

63.66
9.925
5.841
4.604
4.032
3.707
3.499
3.355
3.250
3.169
3.106
3.055
3.012
2.977
2.947
2.921
2.898
2.878
2.861
2.845
2.831
2.819
2.807
2.797
2.787
2.779
2.771
2.763
2.756
2.750
2.704
2.660
2.639
2.626

318.31
22.327
10.215
7.173
5.893
5.208
4.785
4.501
4.297
4.144
4.025
3.930
3.852
3.787
3.733
3.686
3.646
3.610
3.579
3.552
3.527
3.505
3.485
3.467
3.450
3.435
3.421
3.408
3.396
3.385
3.307
3.232
3.195
3.174

636.62
31.599
12.924
8.610
6.869
5.959
5.408
5.041
4.781
4.587
4.437
4.318
4.221
4.140
4.073
4.015
3.965
3.922
3.883
3.850
3.819
3.792
3.768
3.745
3.725
3.707
3.690
3.674
3.659
3.646
3.551
3.460
3.416
3.390

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RESEARCH METHODS (slide 86)

0.001

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Example 1: Sol nd t & t-critical

t=
t=

d
Sd / n
4.
2
5.67/ 5

1 66

t = . i.e. t-calculated
tn1, = t51,0.05 = .
i.e.

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2 776

t-tabulated

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Example 1: Sol nd the p-value

Use

1 66|

t=| .

to nd p-value. Scan the body of the table

Remember it is a two-tailed test


Value is 1.660 &

p value = 0.10

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Example 1: Sol compare & conclude

Has the training made a dierence? Due to chance?


Since the

p = 0.10

t statistic of |1.66|
= 0.05) we don't

>

is <

t critical

of 2.776 (or

reject the H0 at the 5%

signicance level.
No signicant dierence between complaints before & after.
Training was bogus. Any dierence was by chance.

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Summary of results
 Has the training made a difference in the number of

complaints (at the = 0.05 level)?


H0: x y = 0
H1: x y 0
= .05

d = - 4.2

Critical Value = 2.776


d.f. = n 1 = 4

Reject

Reject

/2
- 2.776

2.776

- 1.66

Decision: Do not reject H0


(t stat is not in the reject region)

Test Statistic:

t=

d
4.2
=
= 1.66
sd/ n 5.67/ 5

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Doing paired t-test in R software


Arrange data the normal way from excel. You can ignore the
names of salespersons
complaint=read.delim('clipboard')#load data from excel
complaint #view the data. feel it
boxplot(complaint$after,complaint$before, col="darkgreen")
#can check boxplot of the data
t.test(complaint$after,complaint$before, paired=TRUE)#run
the paired t test
Learn the independent t-test for independent samples on your
own
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Practice Question 1
A new therapy has been devised which is supposed to
lower blood pressure. The systolic blood pressure of 10
patients were taken before and after completing the course
(see below). Does this therapy work? Use a significance
level of 0.05.
Before After Difference
120
130 10

Before After Difference


129
129 0

131

125 -6

136

128 -8

122

124 2

138

129 -9

139

130 -9

131

132 1

123

129 6

125

130 5

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Practice Question 2
Tweaa is the VC of a large manufacturing company. He recently
noticed an increase in absenteeism that he thinks is related to
the general health of employees. Four years ago, in an attempt
to improve the situation, he began a tness program in which
employees exercise during their lunch hour. To evaluate the
program, he randomly samples some participants & found the
number of days each was absent. Below are the results. At 0.05
signicance level, did the program reduce absenteeism?

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Abseenteeism before & after tness prog

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Practice Question 2 cont'


a) State the null & alternative hypotheses.
b) What is the critical value of the test statistic?
c) What is the value of the test statistic?
d) Decide using the critical value approach.
e) What is the p-value?
g) Did the tness program reduce absenteeism at the 5%
signicance level? Conclude practically.

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Session 5 Overview
In some practical applications normality axiom is not tenable
especially when we have a wide range of distributions of the
parent population.
In such a case, we use nonparametric tests or distribution free
tests.
In this session we nonparametric tests for testing equality of
means/medians of 2 population distributions

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Session 5 Overview

Wilcoxon signed-rank test


Mann-Whitney-U test or Wilcoxon rank sum test
Draw appropriate conclusions

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Reading List
Chap 19 of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Pages 344-379 of Lane, D. (2003). Online Statistics Education: A
Multimedia Course of Study. In D. Lassner & C. McNaught (Eds.),
Proceedings of World Conference on Educational Multimedia, Hypermedia
and Telecommunications 2003 (pp. 1317-1320).
Chap 10 of Newbold, P., Carlson, W. & Thorne, B (2013) Statistics for
Business and Economics, 8/E, Pearson
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Parametric vs. Nonparametric tests


Parametric test

Nonparametric

One-sample t-test
Binomial
Paired t-test (dept)
Wilcoxon signed-rank test
Paired t-test (dept)
McNemar's Chi-square test
Independent t-test
Mann-Whitney U or Wil. ranksum
Pearson's correlation
Spearman's corr (xy)
Pearson's correlation
Kendall tau rank corr (xyz)
ANOVA (>2 indep. grps)
Kruskal-Wallis test
Repeated meas. ANOVA
Friedman Test, Cochran Q
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Nonparametric Mann-Whitney U test

The Mann-Whitney U test or the Wilcoxon Rank Sum test is for


testing the equality of means in 2 independent / unpaired
samples. Mann-Whitney-Wilcoxon (MWW) test.

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Nonparametric Mann-Whitney U test

The main idea is to test whether 2 samples come from the same
population (i.e., if 2 populations have the same shape) by
comparing the ranks or ordinal values of the observations.
Some investigators interpret this test as comparing the medians
between the 2 populations.

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H 0 & Ha for Mann-Whitney U (1)

H 0 : m1 m2 = 0
Ha : m1 m2 6= 0
If median (m) of sample
Ha : m1 m2 > 0 or
Ha : m1 > m2

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1 is > sample 2,

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Ha

becomes

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H 0 & Ha for Mann-Whitney U (2)

H0 :
Ha :

The 2 populations are identical


The 2 populations are dierent

Example
H0 :
Ha :

eciency do not dier between foreign & domestic banks.


foreign banks have higher eciency scores than domestic

banks.

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H 0 & Ha for Mann-Whitney U (3)

Median class size for Math is larger than median class size for
English. Write
H0: MedianM

H 0 & Ha ____
MedianE (Math

median is not greater than

English median)
HA: MedianM > MedianE (Math median is larger)

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H 0 & Ha for Mann-Whitney U (4)

Median class size for Math is not at least that of the median
class size for English. Write Ho and Ha ____
H0: MedianM

MedianE

HA: MedianM < MedianE

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Example 1: Mann-Whitney U (1)


Korle Bu hospital is undertaking a clinical trial designed to
investigate the eectiveness of a new drug to reduce symptoms
of asthma in children. Participants are asked to record the
number of episodes of shortness of breath (dyspnea) over a 1
week period following receipt of the assigned treatment. The
non-normally distributed data are shown below. Is there a
dierence in the number of episodes of shortness of breath over
the 1 week period in participants receiving the new drug as
compared to those receiving the placebo?

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Example 1: Mann-Whitney U (2)

By inspection, it appears that participants receiving the placebo


have more episodes of shortness of breath. i.e. suer more from
dyspnea
BUT, is this statistically signicant?

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Plot

&,E
^

E

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Example 1: Mann-Whitney U (3)

In a normal research, check skewness 1st.


Note:

n1

may be >

n2 .

Check normality: histogram above

Given non-normality & small sample size

(n1 = n2 = 5),

nonparametric test is OK.


Hypotheses??

H 0 : m1 m2 = 0 ; Ha : m1 m2 6= 0

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Step 1: Assign ranks

Order the whole data

(n = 10)

from smallest to largest, ignoring

which group they belong to.


Assign ranks from 1 to 10.
Also, track the group assignments in the total sample.

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MWW U test procedure

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Step 2: Assign ranks

R1 =
R2 =

= 37
drug) = 18

sum of the ranks in group 1 (placebo)


sum of the ranks in group 2 (new

1)
(R1 + R2 ) = n(n+
2
37 + 18 = (10 11) /2 = 55
Check if:

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Test Statistic for the Mann Whitney U Test

The Mann-Whitney

U1 = R1
U2 = R2

calculated is the test statistic

n1 (n1 +1)
2
n2 (n2 +1)
2

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Details of U
n1 (n1 +1)
2
if

all

sum of the ranks of the observations that would result

the observations in the sample 1 were smaller than the

observations in sample 2.

n2 (n2 +1)
2
if

all

sum of the ranks of the observations that would result

the observations in the sample 2 were smaller than the

observations in sample 1.

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Results

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Finding critical values

The critical value or U tabulated is


Find
Find

n1
n2

Un ,n ,
1

in group 1 (smallest group) along the top of the chart.


in group 2 (largest group) along the side of the chart.

Consider carefully when choosing the

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U tab

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Decision Rule for U


Two-sided test:
One-sided test:
if

U1 Un1,n2,

One-sided test:
if

(HA : m1 6= m2) reject H0 if Umin Un1,n2,


(HA : m1 < m2) reject H0 if U1 is too small i.e.
(HA : m1 > m2)

reject

H0

if

U2

is too small i.e.

U2 Un1,n2,

In summary, If the smaller calculated U is

tabulated U, reject

Ho & conclude there is a dierence!

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Back to example

U1 = R1
U2 = R2

n1 (n1 +1)
2
n2 (n2 +1)
2

= 37
= 18

5(5+1)
2
5(5+1)
2

= 22
=3

(smaller)

Check always IF:

U1 + U2 = n1 n2
22 + 3 = 5 5 = 25

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Decision

Recall: For a two-tail,

Umin Un1,n2,/2
Umin = 3> U5,5,0.05 = 2
We can't reject Ho because 3 >
Reject H0 if

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2.

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Conclusion

Conclude: we have statistically signicant evidence at

= 0.05,

to show that the two medians of numbers of episodes of


shortness of breath are equal.
That is, no dierence in the medians . Our example is unique.
On the surface, sample data suggest a dierence, but the

are

too small to conclude that there is a statistically sig.dierence.

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R for MWU & Wilcoxon

1st: Arrange data long (vertical, with 1,0 for next column)
wm <-read.delim('clipboard') ## load data
wm ## view data
boxplot(wm, col="green")## quick boxplot
wilcox.test(drug ~ group, conf.int = TRUE, paired = FALSE,
data=wm)## compute mann-whitney test

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R interpretation for U (optional)


## result: W = 22, p-value = 0.05855 alternative
hypothesis: true location shift is not equal to 0.
So there is no difference. The two samples are the
same. We can't reject H0 as p-value >
wilcox.test(drug ~ group, alternative =
"two.sided", conf.int = TRUE, paired = TRUE,
data=wm)## compute Wilcoxon signed rank test with
continuity correction
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Practice Assignment 1
A random sample of starting monthly salaries for graduates from
2 Ghanaian universities are below (GHc1000s):

UG KNUST
30

28.5

35

38

29

30.5

37.5

26

32

37

40

29
33
32

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Practice Assignment 1 cont.

Is there enough evidence at the 5% signicance level to say that


the median starting salary for UG graduates is higher than the
median starting salary for KNUST graduates? Solve by hand
&/or any software (e.g. R)

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Session 6 Overview

We expand the samples to 3 or more & explores if signicant


dierence exist among them.
This is achieved via ANOVA (dependent and independent), &
their nonparametric analogues  Friedman test & Kruskal Wallis
test

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Session 6 outline

null & alternative hypotheses in ANOVA


repeated ANOVA & independent ANOVA
Within & Between variations, F statistic,
ANOVA in excel & R

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Reading List
Chap 13 of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Pages 493-549 of Lane, D. (2003). Online Statistics Education: A
Multimedia Course of Study. In D. Lassner & C. McNaught (Eds.),
Proceedings of World Conference on Educational Multimedia, Hypermedia
and Telecommunications 2003 (pp. 1317-1320).
Chap 15 of Newbold, P., Carlson, W. & Thorne, B (2013) Statistics for
Business and Economics, 8/E, Pearson
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T-Test

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ANOVA

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MANOVA

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Parametric vs. Nonparametric tests


Parametric test

Nonparametric

One-sample t-test
Binomial
Paired t-test (dept)
Wilcoxon signed-rank test
Paired t-test (dept)
McNemar's Chi-square test
Independent t-test
Mann-Whitney U or Wil. ranksum
Pearson's correlation
Spearman's corr (xy)
Pearson's correlation
Kendall tau rank corr (xyz)
ANOVA (>2 indep. grps)
Kruskal-Wallis test
Repeated meas. ANOVA
Friedman Test, Cochran Q
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Assumptions for t-test, anova, manova


Normality
Continuous or scale or ratio data
Categorical groupings
Independent variables across groups
Independent random sampling
Homogeneity of variance for dependent variable

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ANOVA

One-way ANOVA: One factor  e.g. smoking status (never,


former, current)
Two-way ANOVA: Two factors  e.g. gender (M/F) & smoking
status (never, former, current)
Three-way ANOVA: Three factors  e.g. gender, smoking &
beer consumption

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ANOVA test - dependent/repeated measures


One-way repeated (correlated) measures: single group on which
you have measured something a few times.
It's the nonparametric analogue of the dependent Friedman test
For example, in research class, I give a test at the start of a
topic, at the end of the topic and at the end of the subject.
I can use a one-way dependent measures ANOVA to see if
student test performance changed over time

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ANOVA test - Independent


In an independent groups test, the subjects in the groups are
dierent people.
In a dependent/repeated measures case, the same subjects are
being tested under dierent conditions. They are the same
people.
(It doesn't have to be people; they could be owers, car engines,
rms or even barrels of beer)

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Is this dependent or independent sample data


Compare 5 subjects each tested with 4 drugs. drug is the
repeated variable here

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ANOVA (independent sample)

One-Way Analysis of Variance measures the dierence among the


means of three or more groups

Examples:

ROA of foreign, domestic & state banks


Expected mileage for 5 brands of tires

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ANOVA (hypotheses)
H0 : 1 = 2 = 3 = ... = K
All population means are equal
i.e., no variation in means between groups

HA : i 6= j

for at least one

i, j

pair

At least 1 population mean is dierent


i.e., there is variation between groups
Does not mean

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are dierent (some pairs may be the same)

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ANOVA (3)

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ANOVA (4)

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ANOVA chart

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Details of ANOVA chart (1)

SS = Sum of Squares
df = degrees of freedom
MS = Mean Squares
n = sum of the sample sizes
K = number of groups

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from all groups

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Explaning Table Elements

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SST
SST =

ni
K X
X

(xij x)

i=1 j=1

ni = number of observations in group i


xij =Pj th observation from group i
x = Nni xi overall sample mean
2
2
2
SST = (x11 x) + (x12 x) + ... + (xKnK x)
MST = SST
n1
Mean Square Total = SST/df

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SSW
SSW =

ni
K X
X

(xij xi )2

i=1 j=1

ni = sample size from group i


xi = sample mean from group i
xij = j th observation in group i
SSW = (x11 x1 )2 + (x12 x1 )2 + ... + (xKnK xK )2
MSW = SSW
nK
Mean Square Within = SSW/df

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SSG
SSG =

K
X

ni (
xi x)

i=1

ni = sample size from group i


xi = sample mean from group i
x = grand mean (mean of all data values)
2
2
2
SSG = n1 (
x1 x) + n12 (
x2 x) + ... + nK (
xK x)
MSG = KSSG
1
Mean Square Between Groups = SSG /df
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ANOVA F-Test Statistic

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Interpreting the F Statistic

The F statistic is the ratio of the between estimate of variance


and the within estimate of variance
The ratio must always be positive

df1 = K 1
df2 = n K

will typically be small


will typically be large

Decision Rule: Reject

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H0

if

F > FK 1,nK ,

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Decision: ANOVA

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Example of ANOVA

Below are the salaries in thousands of Ghana cedis for three


dierent MBA groups:

RMBA WMBA EMBA


1

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ANOVA E.G.: MBA groups Questions


i. Dene null and alternative hypotheses.
ii. Find the critical value of test statistic
iii. Find the value of the test statistic.
iv. What is your decision?
v. Is there a statistically signicant dierence between the mean
salaries of these MBA groups? Prove.
vii. If so, which group earns the least? Conclude practically.

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ANOVA Table

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MBA groups Questions (1)

i. Dene null and alternative hypotheses.

ANSWER

H 0 : 1 = 2 = 3
Ha : i 6= j for at least

one pair, where

i, j = 1, 2, 3

ii. Find the critical value of F test statistic

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MBA groups Questions (2)

Fcritical = FK 1,NK ,
K = number of groups , df1 = K 1, row
N = total sample from all groups , df2 = n K
Ftab = FK 1,NK , = F31,93,0.05 = F2,6,0.05
Ftab = 5.14

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, column

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ANOVA Table

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Recall data

RMBA WMBA EMBA


1

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MBA groups Questions (4)

iii. Find the value of the test statistic.


First: Find

x1 =
x2 =
x3 =

xi,

then grand mean

6
=2
3
15
=5
3
24
=8
3

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MBA groups Questions (5)


PN

(xij )
N
1+2+3+4+5+6+7+8+9
=5
9

Grand mean:

x=

x=

SSG =

K
X

ni (
xi x)

i=1

SSG = 3(5 2)2 + 3(5 5) + 3(5 8)2


SSG = 54
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MBA groups Questions (6)

SSW =

ni
K X
X

(xij xi )2

i=1 j=1

SSW1 = (1 2)2 + (2 2)2 + (3 2)2


SSW1 = 2

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MBA groups Questions (7)

SSW2
SSW2
SSW3
SSW3

= (4 5 + (5 5) + (6 5)2
=2
= (7 8)2 + (8 8)2 + (9 8)2
=2

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MBA groups Questions (8)

SSW = SSW1 + SSW2 + SSW3


SSW = 2 + 2 + 2
SSW = 6

BG
WG

SS df MS F
54

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MBA groups Questions (9)


MSG = KSSG
1 and MSW =
MSG = 54
= 27
2
MSW = 66 = 1

BG
WG

SSW
NK

SS df MS F
54

27

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MBA groups Questions (10)


F =
F =

MSG
MSW
27
= 27
1

BG
WG

SS df MS F
54

27

27

iv. What is your decision?


Decision Rule: Reject

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H0

at 5% since

F = 27 > Ftab = 5.14

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MBA groups Questions (11)

v. Is there a statistically signicant dierence between the mean


salaries of these MBA groups? Prove.
YES since we rejected H0, it means there is a dierence
vii. If so, which group earns the least? Conclude practically.
RMBA with lowest mean of 2

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one-way ANOVA in excel

For independent samples:


Data Analysis > ANOVA: Single Factor
For dependent/repeated measures samples:
Data Analysis > ANOVA: Two- Factor Without Replication

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MBA groups Excel

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Example 2: Attempt

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Example 2: Guide (1)

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Example 2: Guide (2)


Club 1 Club 2 Club 3
254
234
200
263
218
222
241
235
197
237
227
206
251
216
204

x1 = 249.2

n1 = 5

x2 = 226.0

n2 = 5

x3 = 205.8

n3 = 5

x = 227.0

n = 15
K=3

SSG = 5 (249.2 227)2 + 5 (226 227)2 + 5 (205.8 227)2 = 4716.4


SSW = (254 249.2)2 + (263 249.2)2 ++ (204 205.8)2 = 1119.6
MSG = 4716.4 / (3-1) = 2358.2
MSW = 1119.6 / (15-3) = 93.3
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F=

2358.2
= 25.275
93.3

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Example 2: Guide (3)

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Example 2: Guide in excel

For independent samples:


Data Analysis > ANOVA: Single Factor
For dependent/repeated measures samples:
Data Analysis > ANOVA: Two- Factor Without Replication

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Example 2: Guide steps in excel

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Example 2: Guide: Excel Output


EXCEL: data | data analysis | ANOVA: single factor
SUMMARY
Groups

Count

Sum

Average

Variance

Club 1

1246

249.2

108.2

Club 2

1130

226

77.5

Club 3

1029

205.8

94.2

ANOVA
Source of
Variation

SS

df

MS

Between
Groups

4716.4

2358.2

Within
Groups

1119.6

12

93.3

Total

5836.0

14

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F
25.275

P-value
4.99E-05

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F crit
3.89

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Arrange data for anova in R

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one-way ANOVA in R (1)

## Arrange data in excel with 1st column being ratio variables


(where 1st group numbers comes rst followed by next & so on).
This is for independent sample.
## The 2nd column has group names, with 1st group names
rst.

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one-way ANOVA in R (2)


anovaclub = read.delim(0 clipboard 0 )

## This loads the anova

data from clipboard

save(anovaclub, file = data)# save loaded data


str (anovaclub) ## put data in order or 3 groups as

in excel

(I've done already done this in excel)

anovaclub

## view data

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one-way ANOVA in R (3)

plot(distance ~ club, data=anovaclub) ## Create side-by-side


boxplots of the data. You'll see the variances don't have a
constant mean
results=aov(distance~club,data=anovaclub)## t ANOVA
models or table. # distance is the dep. var. # club = indep var.s
summary(results) ## show your answer

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Results

Conclusion?? As

p value = 4.99E 05,

there is a sig. di. in

mean distances of 3 clubs

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Summary: Parametric vs Nonparametric tests


Parametric test

Nonparametric

One-sample t-test
Binomial
Paired t-test (dept)
Wilcoxon signed-rank test
Independent t-test
Mann-Whitney U or Wil. ranksum
Pearson's correlation
Spearman's corr (xy)
Pearson's correlation
Kendall tau rank corr (xyz)
ANOVA (>2 indep. grps)
Kruskal-Wallis test
Repeated meas. ANOVA
Friedman Test

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Practice Assigment 1 on ANOVA


Below are the salaries in thousands of Ghana cedis for three
dierent MBA groups:

RMBA
9
7
11
9
12
10

WMBA
13
20
14
13

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EMBA
10
9
15
14
15

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Practice Assigment 1 on ANOVA cont.

a. Formulate the null and alternative hypothesis


b. What is the decision rule, given the 5% signicance level?
c. Find the critical value of the test statistic
d. Compute the value of the test statistic

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Practice Assigment 1 on ANOVA cont..

e. Conclude if there a statistically signicant dierence in the


mean salaries between these MBA groups? If so, which group
earns the least? Conclude practically.
f. Determine what is driving the dierence in means by
performing multiple tests for each pairwise dierence
g. Which Group's mean salary is mostly driving the dierence

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Practice Assigment 2 on ANOVA


Dr. Asuo had the students in his research class rate his
performance as Excellent, Good, Fair, or Poor. The rating (i.e.
the treatment) a student gave the doctor was matched with his
or her course grade, which could range from 0 to 100. The
sample information is reported below. Is there a dierence in the
mean score/grade of the students in each of the four rating
categories? Use the .05 signicance level.

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Assignment cont.

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Assignment cont.

a. Formulate the null and alternative hypothesis


b. What is the decision rule
c. Calculate the critical value of the test statistic
d. Compute the value of the test statistic

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Assignment cont.

e. Is there a statistically signicant mean score of the students in


each of the four rating categories? If so, which category of
students scored the most? Conclude practically.
f. Determine what is driving the dierence in means by
performing multiple tests for each pairwise dierence

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Session 7 Overview
Research projects and managerial decisions often involve the
linkages between two or more variables. For instance, what is the
relationship between blood pressure and a person's weight? Do
other factors age, stress, diet, exercise etc - apart from weight
aect BP? How do you control these? How do you use each of
them to predict BP? What assumptions must be in place for the
modelling of such an association to exist? This session examines
association via correlation and causality via regression.

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Session 7 outline

correlation, simple regression & multiple regression


predictors & outcome variable, scatter plots, error term,
Goodness-of-t, signicant tests, condence intervals, p-value,
assumptions: linearity, normality, heteroskedasticity,
autocorrelation, heterogeneity, multicollinearity etc

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Reading List
Chap 14 & 15 of Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2011).
Statistics for Business and Economics (11th ed.). Sounth-Western Cengage
Learning
Chap 2-8 of Gujarati D. (2003), Basic Econometrics, 4th ed
Chap 11 & 12 of Newbold, P., Carlson, W. & Thorne, B (2013) Statistics
for Business and Economics, 8/E, Pearson
Chap 1-7 of Wooldridge, J.M. (2013), Introductory Econometrics: A
Modern Approach, 5th ed
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What is Correlation?

Bivariate Correlation: a way of representing the relationship


between 2 variables
Correlations are viewed as strong or weak

brother or sister; how about cousins?


Correlations are viewed also as positive or negative

consumption & income ; price & quantity demanded

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Is the link positive of negative?

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Is this link positive of negative?

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Correlation Coecient
Correlation coecient is a statistic that quanties a relation
between two variables
Falls between -1.00 and 1.00
The absolute value of the number (not the sign) indicates the
strength of the relation

Pearson's product Moment Correlation Coecient ( ) is a


measure of Correlation

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Types of Correlations: incl curvilinear

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What is Regression?
Regression analysis is a statistical technique used to analyze the

1
1 several
simple multiple

nexus between a
variable &

outcome/ dependent/ explained/ response

variables, leading to

) predictor/independent/explanatory
(

) regression. It deals with

causation whilst correlation deals with association. Variables


must be metric. In certain situations, non-metric (qualitative)
IVs can be incorporated using transformations in a dummy
variable regression e.g.: education's eect on income, impact
ofhours of study on students' grades

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Simple vs. Multiple Regression Models

Simple regression:

yi = + xi + ui

Multiple model:

yi = 0 + 1 Ai + 2 Bi + 3 Ci + 4 Di + 5 Ei + ui
i = 1, ..., n = individual (group, country) index .
This is for a cross-sectional data set

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Variables in a regression model

yi = response variable for observation i


A, B, ...E = values of k regressors for observation i
ui = random noise or idiosyncratic error for observation i

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Real examples: Regression Model vs. Equation

wagei = 0 + 1 educi + 2 experi + 3 posi + 4 abilityi + ui


BPi = 0 + 1 agei + 2 weighti + 3 stressi + 4 pulsei + ui
Qid = 0 + 1 Pi + 2 Yi + 3 Ai + 4 Ci + ui
wage = 150 + 0.85educ + 2.4exp + 0.25pos + 0.05abili

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Assumptions

Linearity :

has a linear dependence on

Normality & Homoscedasticity: Errors are stochastic & variances


are homogenous

N 0, 2I

No Autocorrelation: errors are independent / orthogonal


No high multicollinearity, i.e. we need exogeneity of IVs.

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Dummy Variables Regression

A dummy variable is a categorical independent variable with 2


levels:
If more than 2 levels, the number of dummy variables needed is
= number of levels - 1
Also called categorical or dichotomous or binary or 0-1 variable.

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Interpret dummies: ROA of rms

ROAi =

500 + 20Profit + 30Type + 5Assets


i

where Type is 1 if the rm is domestic or 0 if foreign


Interpret the coecient of prot, assets & type.
On average, ROA was 30 units greater when the rm was
domestic than foreign, given prot & assets.

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Example
Brukutu Ventures, a local gin distillery is concerned about the
demand for its favourite gin bitters. Demand in most of its retail
shops has been hit hard due to new entrants into the market.
Management is concerned & wants to determine which

predictors , better explain the quantity demanded (Q) of gin


bitters, apart from the price (P) of gin. Of the determinants of
demand, the following were identied: price of complements (C),
average real income of customers (M) ...

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Data: cross-sectional or panel?

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Example cont'
location of retail shop (where LU=1 if location is urban or 0 if
rural area); dominant occupation (teaching, shing & trading)
around a retail shop (where OT=1 if the occupation is teaching
or 0 otherwise & OTR=1 if the occupation is trading or 0
otherwise); & nally, the dominant religion (Christian, Muslims
& Buddhists) of the people (where RC=1 if the people are
Christians or 0 otherwise & RM=1 if the people are Muslims or 0
otherwise). Use the correlation matrix & (dummy) regression
output to answer the questions that follow.

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Data analysis in excel

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How to generate a descriptive statistics

In excel choose: Data Tab, Data Analysis>Descriptive


Statistics> OK> Input Range
Copy all data including headings.
Tick Labels in First Range
Select Output Range & where the results must be
Tick summary statistics>OK

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Do descriptive statistics in excel

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Pearson: Data A>Correlation>ok>input range

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Pearson Correlations: Use it to Ans below

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Correlation questions

What's the correlation coecient for A & P, P & S?


Which 3 pairs of variables are perfectly correlated?
Which 2 pairs of variables are mostly strongly correlated with the
response variable?
Q & P (-0.87)
Q & OTR (-0.78)

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Correlation questions cont'


Which 3 pairs of variables are mostly multicollinear?
P & OTR (0.76)
P & C (-0.74)
M & RM (-0.73)
Which 3 pairs of variables are least correlated?
M & OT (-0.03)

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Correlation questions cont'

OT & RC (0.05)
Q & OT (-0.11)
From matrix, identify 2 very good predictors
P (-0.87)
OTR (-0.78)

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Regression in excel: Data Analysis > Regression


>OK>Input Y Range> Input X Range

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Regression output

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Session 8 Overview: Regression continues

This session continues with an question worth asking and


answering in multiple regression analysis

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Regression output specially designed

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Goodness of t: Is the model wise?

ESS = Error Sum of Squares: measures the residual variation in


the data that is not explained by the independent variables
RSS = Regression Sum of Squares: measures amount of
variation explained by regression
TSS = Total Sum of Squares

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Is model well-t? Coecient of determination R 2

R2

is the fraction of the total sample variation in

that is

explained by the OLS regression line.

RSS
ESS
R2 = TSS
= 1 TSS
0 < R2 < 1
R
Y

If

is large, much variability in

Also, Multiple

R=

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R2

is explained by

is the multiple correlation coecient

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Adjusted R 2 (1)

When explanatory variables are added to the model, the

R2

never

decreases. But it should, because of the 'curse of dimensionality'.


The wish to penalize models with large
adjusted
Both

R2

&

has motivated an

dened by adjusting for the degrees of freedom.

measure the strength or tness of the regression

model.

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Adjusted R 2 (2)

R =1

ESS/(nK 1)
TSS/(n1)

n1
R = 1 (1 R 2 ) nK
1
With the

, as

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rises,

RSS

&

DoF

both fall

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Some Formulae (1)


K =
tj =

No. of indep. variables (excl intercept)

j
S.E .(^ )
j

j tnK 1, Sj
TSS = ESS + RSS
N = TSSdf + 1
2 = RSS
TSS

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Some Formulae (2)

Multiple

R=

MSR =
MSE =

RSS
K
ESS
NK 1

R2

N1
R = 1 (1 R 2 ) NK
1

F = MSR
MSE
FK ,NK 1,

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Find missing numbers denoted by letters


G= RSS = TSS - ESS = 34600 - 402.65 = 34197.35
B =
A =

RSS
R 2 = TSS
=

R 2 = 0.99

34,197.35
34600

= 0.99

D = N = TSSdf + 1 = 39 + 1 = 40
E = RSSdf = 8
F = TSSdf = 8 + 31 = 39

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Regression output specially designed

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Fill in (2)

C =

R = 1 (1 R 2 )

N1
NK 1

C = 1-(1-0.99)(39)/(31) = 0.99
H = MSR=RSS/K = 34197.35/8= 4274.67
I = MSE=ESS/N-K-1 = 402.65/31 = 12.99
J = F=MSR/MSE = 4274.67/12.99 = 329.07

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Regression output specially designed

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Fill in (3)
tj =
K =
L =

j
S.E .(^ )
j

coeff
SE

= t SE = 1.57 2.01 = 3.16


0.98
SE = t =
1.30 = 0.75

t = SE
= 419.92.43 = 3.95
N, Read N =| 1.35 |, you N = 0.20
O, Read O =| 8.58 |, you N = 0.00
M =

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Regression output specially designed

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Regression Q&A (1)

Specify Brukutu Ventures' regression model

Q = 0 + 1 P + 2 C + 3 M + 4 LU + 5 OT
+6 OTR + 7 RC + 8 RM + u
Write the estimated regression equation.
Q = 280.27 - 3.16P - 0.11C - 0.98M - 5.11LU - 19.43OT 46.47OTR + 15.55RC - 23.01RM

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Regression output specially designed

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Regression Q&A (2)

Using just the

p value , is the estimate of price of complements

statistically dierent from 0? Why or why not?


.ANSWER
YES. Its coecient is statistically dierent from 0 (i.e. is
signicant) because

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p value = 0.01

<

RESEARCH METHODS (slide 231)

= 0.05

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Regression output specially designed

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More regression Q&A on signicance


Using just the p-values, which variables' coecients are
signicantly dierent from zero?
C (0.01)
OT (0.00)
OTR (0.00)
RC (0.00)
RM (0.00)

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Regression Q&A (3)

Test

if the coecient of price of gin is statistically signicant.

ANSWER

H0 : 1 = 0 i.e. 6 is not signicant


HA : 1 6= 0 i.e. 6 is signicant (always

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a two-tail)

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Regression output specially designed

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Regression Q&A (4)

ANSWER CONTINUES..
t cal (1 ) = coe/s.e. = -2.01 2.01
t tab = tnK 1, = t4081,0.05 = t31,0.05

= 2.042

Decide & Conclude!!! Recall Rule


As the cal=2.01 < tab=2.04, we don't reject H0 at 5% level, &
conclude that coecient of price of gin is not signicant

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Fitness of Model

Is the regression model well t? Interpret the apt measure used

ANSWER
R2

= 0.99 = 99%

Since

R 2 > 50%,

model is t!!!

99% of the variation in the Qd of gin bitters is explained by all


the indep. vaiables

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Regression output specially designed

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Joint signicance, without hypotheses

Are the coecients jointly signicant?

ANSWER

Use only the signicance F, i.e. p-value for F test.


Reject

H0

If

p value <

As p-v=0.00 < 0.05, all estimates/coecients are jointly


signicant.

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Test if coecients are jointly signicant


H0 : 1 = 2 = ... = 8 = 0 (all the coe.s are insig.)
HA : at least one i 6= 0, i = 1 6 (at least 1 X aects Y )
Find calculated F & tabulated F
Reject

H0

if

F =

MSR
MSE

> FK ,nK 1,

Reject H0, since F-cal = 329.07 > F-tab

= 8,31,0.05

cal > tab


= FK ,NK 1,

i.e. if

= 2.26

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Regression output specially designed

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Predictions & Condence Interval


How much higher is the Q predicted to be if a price rises by
GHc8?

4BP = 8 3.16 = 25.28


Form a 95% condence interval for the eect of changes in real
income on Q.
That is,

t-tab * std error of

j tnK 1,/2 Sj
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= ??

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CI for real income

0.98 t31,0.05 0.75


0.98 2.042 0.75
0.98 1.5315
CI= -2.51 and 0.55

CI : 2.51 3 0.55

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Variance Ination Factors - VIF


(Multicollinearity) Multicollinear variables are 2 independent
variables that are highly associated (linked) with each other
through their correlation coecient. In this case, you don't
include the dependent/outcome/response variable. It is a curse.
VIF measures how much the variance of your coecients is
inated" by multicollinearity

VIF =

1
1Rj2

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Variance Ination Factors - VIF cont'

where

Rj2

is the

R2

when we regress Xj on the remaining

independent variables
If there is no collinearity between X1 & X2, then VIF = 1.
As a rule of thumb, VIF > 10 indicates high collinearity

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Recall Regression output

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Recall Pearson Correlations

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Question on multicollinearity

Using only the VIF, which one of the pairs of variables selected
to be multicollinear may be deleted? Justify?

ANSWER

P & OTR, drop P with higher VIF of 24.15


P & C, drop P with higher VIF of 24.15
M & RM, drop RM with a higher VIF of 20.00

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Interpretations of coecients: changing factors

Interpret the coecient of income


1 unit rise in average real income of customers will reduce Qd of
Brukutu gin bitters by 0.98 units.
Also, interpret the coecient of price & complements
1 unit rise in the price of C of gin will reduce Qd of Brukutu gin
bitters by 0.11 units.

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Interpretations of coecients: dummies


Interpret the coecient of teaching occupation
On the average, holding all other factors constant, Qd of
Brukutu gin bitters is expected to be 19.43 units less if the
people are teachers than shers.
Interpret the coecient of urban location
On the average, holding all other factors constant, Qd of
Brukutu gin bitters is expected to be 5.11 units less if a shop is
located in an urban than a rural area.

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Interpretations of coecients: more dummies

Interpret the coecient of christian religion


On the average, holding all other factors constant, Qd of
Brukutu gin bitters is expected to be 15.55 units more if the
people are Christains than Buddhists.
Interpret the coecient of muslim religion

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Predictions in dummy regressions


What is the predicted quantity demanded of gin bitters that sells
for GHc10, has a complement price of GHc50, is sold in a shing,
rural shopping area where the Christian population, on average,
earn an income of GHc5?
Q = 280.27 - 3.16P - 0.11C - 0.98M - 5.11LU - 19.43OT 46.47OTR + 15.55RC - 23.01RM
Q = 280.27 - 3.16(10) - 0.11(50) - 0.98(5) - 5.11(0) - 19.43(0) 46.47(0) + 15.55(1) - 23.01(0)
Q = 253.82

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Predictions in dummy regressions..


What is the predicted quantity demanded of free gin bitters that
has a complement price of GHc30, is located in an urban,
teaching area where the Buddhists population, albeit unemployed
they get gifts from friends?
Q = 280.27 - 3.16P - 0.11C - 0.98M - 5.11LU - 19.43OT 46.47OTR + 15.55RC - 23.01RM
Q = 280.27 - 3.16(0) - 0.11(30) - 0.98(0) - 5.11(1) - 19.43(1) 46.47(0) + 15.55(0) - 23.01(0)
Q = 252.43

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Comparing Predictions..

Compare the predicted quantity demanded of gin bitters made by


some Muslim traders in an urban with that of quantity of gin
bitters made by some Buddhist shers in a rural area given that
both gin bitters cost GHc15, have a complement price of GHc15,
& average real income of customers is GHc20? Which factor(s)
appears to be causing a comparative dierence (if any)?

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Comparing predictions 1st scenario..

Q = 280.27 - 3.16P - 0.11C - 0.98M - 5.11LU - 19.43OT 46.47OTR + 15.55RC - 23.01RM


Q = 280.27 - 3.16(15) - 0.11(15) - 0.98(20) - 5.11(1) - 19.43(0)
- 46.47(1) + 15.55(0) - 23.01(1)
Q = 136.79

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Comparing predictions 2nd scenario..

Q = 280.27 - 3.16P - 0.11C - 0.98M - 5.11LU - 19.43OT 46.47OTR + 15.55RC - 23.01RM


Q = 280.27 - 3.16(15) - 0.11(15) - 0.98(20) - 5.11(0) - 19.43(0)
- 46.47(0) + 15.55(0) - 23.01(0) >
Q = 211.62

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Conclusion based on 2 scenario..

Qd in 2nd scenario is 74.83 higher (= 211.62 - 136.79) than in


1st scenario
Factors causing the comparative dierence are dierences in
location, occupation & religion

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Load data into R & describe it

gin=read.delim("clipboard") #load Qd of gin bitters data from


excel to R. Use only the uncoded categorical variables: e.g.:
loca (urban, rural), occu (teaching, shing & trading) etc. In
excel, hide the variable columns - LU, OT, OTR, RC, & RM
gin #look at your data in R console
summary(gin) #see the summary statistics of the data

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Use psych package to plot histogram etc


require(psych) #To do the next analyses, choose `Install
Packages under packages. Then, type `psych' and click install to
install it. Then type
describe(gin) #Get more descriptive or summary statistics .
What's the sample size? mean for complement?
qqnorm(gin$Q, col="blue", lwd=4);qqline(gin$Q, col="red",
lwd=3) #normal probability plot is a graphical tool for
comparing a data set with the normal distribution.

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Test for normality & with graphs


hist(gin$Q, col="blue" # draw histogram of Qd of gin bitters &
colour it blue
shapiro.test(gin$Q) #test of normality. H0 is data is normal.:
#H0: samples come from normal distribution". Reject H0 if
p-value <= 0.05. In ours, p-value

= 0.00387 < .

Qd data is

not normal
plot(density(gin$Q)) #density plot for Qd of gin bitters

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Scatter plot of Qd vs P

plot(gin$Q, gin$P, main="Qd of gin bitters & P", xlab="P",


ylab="Q", pch=19, col="red", lwd=4) ## where xlab is x-axis
lable & pch= plot character: box, dot, star etc. And "col"=color
to red. Try blue, lightblue, green. pch=21 plots an open circle,
pch=19 plots a solid circle. Try others.

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Plots & scatter plot matrix & correlations


pairs(gin) #Create scatterplot matrix of whole data
pairs(~Q+P+C+M+loca+rel, col="red", data=gin)
#scatterplot matrix of some variables. Can change colors.
cor(gin)#do pearson correlation. You can only do this with the
coded data set

OR

cor(gin[,-which(names(gin) %in% c("loca","occu","rel"))]) #do


after removing any nominal value X rst

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Generate correlations with/without coded data set


round(cor(gin),2) #Generate correlation matrix correct to 2 d.p.
with coded data set OR
round(cor(gin[,-which(names(gin) %in%
c("loca","occu","rel"))]),2) #remove nominal variables rst
library(Hmisc) #install & load library (Hmisc) rst. Then,
rcorr(as.matrix(gin)) #pearson correlation with p-values. OR
rcorr(as.matrix(gin[,-which(names(gin) %in%
c("loca","occu","rel"))]),2) #remove nominal variables rst

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Do a simple regression

ginsimple = lm(Q ~ P, data=gin) #simply regress Q on P.


Q=dep var.; lm=linear model
plot(Q ~ P, col="blue",lwd=2, data=gin,main="my scatterplot
of Q & P & tted line"); abline (ginsimple,lwd=4,col="red") #
add tted reg line to the scatterplot
summary(ginsimple) #show answer of this 2by2

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Do Multiple Regression in R
ginmulti = lm(Q ~ P+C+M+LU+OT+OTR+RC+RM,
data=gin) #run OLS. multiple reg with coded data
ginmulti = lm(Q ~ P+C+M+loca+occu+rel, data=gin) #run
OLS with the nominal data
summary(ginmulti) ## display results
round(connt(ginmulti),2) ## Condende Interval using proled
log-likelihood & correct to 2 d.p.

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Do Multiple Regression in R

anova(ginmulti) ## anova table


library(car) #load the package car rst
round(vif(ginmulti), 10) ## variance ination factor for multico.
2 d.p.
sqrt(vif(ginmulti)) > 10 # which ones are problematic?

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Practice Assignment (1)


The cross-sectional data was extracted from the 1974 Motor
Trend US magazine, and comprises fuel consumption and 10
aspects of automobile design and performance for 32 automobiles
(197374 models). It can be found in: Henderson and Velleman
(1981), Building multiple regression models interactively.
Biometrics, 37, 391411. The data frame is 32 observations on
11 variables. I've dropped the 8th variable, so, you've 10.

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Practice Assignment (2)

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Practice Assignment (3), mtcars variables

Miles per gallon is a measurement of fuel economy in


automobiles. The more number of cylinders, the more power you
can make. But, some 4 cylinder engines make more power than
V8 engines. The power an engine produces is called horsepower.
Displacement is determined from the bore and stroke of an
engine's cylinders. Use R software to do your assignment.

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Practice Assignment (4), variables


[, 1] mpg Miles/(US) gallon
[, 2] cyl Number of cylinders
[, 3] disp Displacement (cu.in.)
[, 4] hp Gross horsepower
[, 5] drat Rear axle ratio
[, 6] wt Weight (lb/1000)

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Practice Assignment (5), variables

[, 7] qsec 1/4 mile time


[, 9] am Transmission (0 = automatic, 1 = manual)
[,10] gear Number of forward gears
[,11] carb Number of carburetors; regulates the ow of air &
gasoline into the engine cylinders.

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Practice Assignment (6), variables


1. How many variables are categorical & how many are
numerical?
2. Display the full descriptive statistics of the data in R. Why do
you think some variables are starred (*)?
3. What is the median for  mpg, standard deviation for
 horsepower , skewness for  weight & the kurtosis for
 displacement?
4. Is the  mpg variable normally distributed? (use any
appropriate plot). Test if  mpg is normal.

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Practice Assignment (7)


5. Create a blue scatterplot matrix of mpg, disp, hp, & drat, wt,
qsec. From your graph, is the correlation between mpg & weight
positive or negative?
6. What's the pearson correlation coecient between mpg &
weight and between  horsepower &  displacement correct to 2
d.p
7. Generate a simple regression plot of mpg on wt with a red
tted line.
8. Run the whole multiple regression model (label the equation
as "regcar") & use it to answer other questions below

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Practice Assignment (8)


9. Specify the regression model for the whole data. You may
shortcut some of the variable names.
10. In one sentence, which variables are signicant and which are
not? Justify
11. Interpret the coecient of displacement, cylsix, ammanual,
gearthree, & carbSix.
12. Is the regression model well t? Explain

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Practice Assignment (9)


13. Compare the mpg of a car with four cylinders, 180
displacement, 115 horsepower, 4.5 drat, 5kg weight, 20 qsec, is
manual, has four gearbox and two carburators with that of the
mpg of a car with six cylinders, 200 displacement, 80 horsepower,
4 drat, 3kg weight, 20 qsec, is automatic, has three gearbox and
three carburators. Which factor(s) appears to be causing a
comparative dierence (if any)?

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Just Attempt This Work (1)


Golden Tulip Hotel claims it is still the best in Ghana despite sti
competition from Fiesta Royal, La Palm, Robinhood etc. It has
embarked on price restructuring and adverts to boost demand for
the coming year. It has a number of outlets (including Golden
Tulip Kumasi city), each having data on the number of meals
served (Q) which is regressed on average price per meal (P in
GH), .......

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Just Attempt This Work (2).

.... competitor's price (Pc in GH), adverts each outlet (A in


GH), & the average income per household in each outlet's
immediate service area (Y in GH). Ordinary least squares
estimation of the regression equation based on the data led to
the following table. Use it to answer the questions that follow.

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Just Attempt This Work (3). corr matrix

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Just Attempt This Work (4)


Which 3 pairs of variables are perfectly correlated?
Which 3 pairs of variables may be mostly strongly correlated with
the response variable?
Which 3 pairs of variables may be mostly multicollinear
Which 3 pairs of variables are least multicollinear?
Which 3 pairs of variables are least correlated?
Find the missing values in the regression output

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Practice Exercise corr matrix

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Reg Output

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Practice Exercise (3)


1 Specify the regression model for the whole data.
2 Write the estimated regression equation.
3 Interpret the coecient of price. Is it consistent with
expectation?

4 Is the estimate of

advert

statistically dierent from 0?

5 Verify the condence interval for the estimate of

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price

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Practice Exercise (4)

Test

if the coecient of

income

is statistically signicant. State

the null and alternative hypotheses both mathematically and in


words, give the test statistic and explain your real-world
conclusions.
Is the regression model well t?
Are the coecients jointly signicant?

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Practice Exercise (5)


Golden Tulip wants to construct an approximate 95% prediction
interval for the number of meals served in an outlet given that
price is GH4, competitor's price is GH5, advertising is GH2
and nothing (i.e. no change) for income. As a consultant to
Golden Tulip, can you assist them?
Which one of the pairs of multicollinear variables selected earlier
could be deleted from the regression? Why?

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References

Paul Newbold, William Carlson, Betty Thorne 2010, Statistics for


Business and Economics, 7th edition, Publisher: Prentice Hall,
ISBN: 978-0-13-608536-2.
Wood, M. (2003) Making Sense of Statistics: A
Non-Mathematical Approach, Basingstoke and New York:
Palgrave.

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References

Levin, J. Fox, J.A., and Forde, D.R. (2010) Elementary Statistics


in Social Research, Pearson Education  11/E
Bryman, A. and Bell, E. (2007) Business Research Methods
(second edition), Oxford
Wisniewski M. (2006) Quantitative Methods for Decision Makers

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References

Thomas, R. (1997) Quantitative Methods for Business Studies,


Hemel Hempstead: Prentice Hall.
Morris, C. (2002) Quantitative Approaches in Business Studies,
sixth edition, Harlow, Essex: Financial Times Prentice Hall.
See course outline for more references.

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