Desirea

Eco 309-02W
Lowe’s
Assignment 3 Preliminary Regression
Scatter plots & Correlation:

Scatterplot shows negative relationship with employment and clear heteroscedascity.

Disposable income shows very small signs of heteroscedascity in a positive linear relationship.
Correlations
Revenue Employment
Employment -0.632
Disposable Income 0.971 -0.614

Correlation shows a negative relationship with employment and a positive

relationship with disposable income.
Y (revenue) Autocorrelation:

Revenue shows clear seasonality and cycle variations, it also has a positive linear trend.

Auto correlation shows significant lags in 1-12 and clear signs of seasonality.
Regression Prediction:
Method
Categorical predictor coding (1, 0)
Regression Equation
Market Market
Decline_1 Expansion
0 0 Revenue = -16260 - 115.0 Employment + 2.3283 Disposable Income

0 1 Revenue = -14164 - 115.0 Employment + 2.3283 Disposable Income

1 0 Revenue = -14958 - 115.0 Employment + 2.3283 Disposable Income

1 1 Revenue = -12862 - 115.0 Employment + 2.3283 Disposable Income

Coefficients
Term Coef SE Coef T-Value P-Value VIF
Constant -16260 6824 -2.38 0.019
Employment -115.0 87.4 -2.13 0.000 3.18
Disposable Income 2.3283 0.0683 34.08 0.000 1.93
Market Decline_1
1 1302 357 3.65 0.000 2.54
Market Expansion
1 2096 376 5.57 0.000 1.42
Model Summary
S R-sq R-sq(adj) R-sq(pred)
1172.14 95.76% 95.60% 95.34%
Analysis of Variance
Source DF Adj SS Adj MS F-Value P-Value
Regression 4 3382360408 845590102 615.46 0.000
Employment 1 217194564 217194564 16.02 0.000
Disposable Income 1 1595608353 1595608353 1161.36 0.000
Market Decline_1 1 18295500 18295500 13.32 0.000
Market Expansion 1 42641693 42641693 31.04 0.000
Error 109 149756418 1373912
Total 113 3532116826
Durbin-Watson Statistic
Durbin-Watson Statistic = 1.73480

The Regression Prediction Analysis both x variables as well as the dummy variable

shows these factors explain 95.60% (R squared value) of company revenue. We see that it is an

accurate model by P values of 0, VIF values under 5 and t values being above 1.960 absolute
value. The durbin-watson stastic registered very high at 1.73, showing the model to be accurate

and reliable with a 95% confidence level according to the K-B test.

Regression Equation
sq resi = 181497
+ 0.01169 sq fits
Coefficients
Term Coef SE Coef T-Value P-Value VIF
Constant 181497 266181 0.68 0.497
sq fits 0.01169 0.00199 5.88 0.000 1.00
Model Summary
S R-sq R-sq(adj) R-sq(pred)
1962729 23.59% 22.91% 19.92%
Analysis of Variance
Source DF Adj SS Adj MS F-Value P-Value
Regression 1 1.33237E+14 1.33237E+14 34.59 0.000
sq fits 1 1.33237E+14 1.33237E+14 34.59 0.000
Error 112 4.31458E+14 3.85231E+12
Total 113 5.64696E+14
The fits and residuals of the revenue regression model were squared and shown above to test t

values. A higher than 1.960 absolute value t value presents heteroscedascity in the model. With a

t value of 5.88, it is shown that heteroscedascity is present in the model.

 Forecast Values:

18649.7

18806.9

18960.2

19114.6

19268.7

19422.9

19577.1

19731.3

19885.5

The regression prediction forecast produced and accurate and reliable set of values. The model presents
with a MAPE of 357.58 and an RMSE of 35427.