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Regression Tutorial 202 With NumXL

This is the fourth entry in our regression analysis and modeling series. In this tutorial, we continue the analysis discussion we started earlier and leverage an advanced technique –regression stability test ‐ to help us detect deficiencies in the selected model, and thus the reliability of the forecast. For more information, visit is at www.numxl.com

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110 views4 pages

Regression Tutorial 202 With NumXL

This is the fourth entry in our regression analysis and modeling series. In this tutorial, we continue the analysis discussion we started earlier and leverage an advanced technique –regression stability test ‐ to help us detect deficiencies in the selected model, and thus the reliability of the forecast. For more information, visit is at www.numxl.com

Uploaded by

NumXL Pro
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Regression202Tutorial 1 SpiderFinancialCorp,2013

Tutorial:Regression202
Thisisthefourthentryinourregressionanalysisandmodelingseries.Inthistutorial,wecontinuethe
analysisdiscussionwestartedearlierandleverageanadvancedtechniqueregressionstabilitytestto
helpusdetectdeficienciesintheselectedmodel,andthusthereliabilityoftheforecast.
Again,wewilluseasampledatasetgatheredfrom20differentsalespersons.Theregressionmodel
attemptstoexplainandpredictweeklysalesforeachsalesperson(dependentvariable)usingtwo
explanatoryvariables:intelligence(IQ)andextroversion.
DataPreparation
Similartowhatwedidinanearliertutorial,weorganizeoursampledatabyplacingthevalueofeach
variableinaseparatecolumnandeachobservationinaseparaterow.
Inthisexample,wehave20observationsandtwoindependent(explanatory)variables.Theresponseor
dependentvariableistheweeklysales.
Next,weintroducethemask.ThemaskisaBooleanarray(0or1),whichchooseswhichvariableis
included(orexcluded)fromtheanalysis.
Letsusetheresultsfromthe3
rd
entryinthistutorialseries,andsetthemaskentryforIntelligenceto
be0andtheextroversiontobe1.

Furthermore,letsexcludeobservation#16,asitprovedtobeinfluentialonourregressionmodel.

Regression202Tutorial 2 SpiderFinancialCorp,2013

Process
Toexaminethestabilityoftheregressionmodel,weneedtosplitthedatasetintotwononoverlapping
datasets:dataset1anddataset2.
Theregressionstabilitytestconstructs3differentregressionsmodels.
1. Model1:Usingobservationsindataset1:
1 1,1 1, 1, ,
...
i P p i
Y X X o | | = + + +
2. Model2:Usingobservationsindataset2:
2 2,1 1, 2, ,
...
i P p i
Y X X o | | = + + +
3. Model3:Usingobservationsindata1andindataset2:
3 3,1 1, 3, ,
...
i P p i
Y X X o | | = + + +
Askthefollowingquestion:

1 2
1, 2,
1
,
:
:
1 2
1
o
j j j
i
i j j
H
H
i
j p
o o o
| | |
o o
| |
= =

= =

- =

- =

s s
s s

InplainEnglish,isanyoftheregressioncoefficientsvalueineitherdatasetsignificantlydifferentfrom
thatintheotherdatasetorthecombineddataset?
Forourdemonstrationpurposes,wewillchoosethefirst10observationsasdataset1,andthe
remainingasdataset2(11to20).Drawalinetooutlinetheseparation.

Regression202Tutorial 3 SpiderFinancialCorp,2013

Nowwearereadytoconductourregressionstabilityanalysis.
- Selectanemptycellinyourworksheetwhereyouwishthetestoutputtobegenerated.
- LocateandclickontheStatisticalTesticon,selecttheregressionstability,andclickonthe
RegressioniconintheNumXLtab(ortoolbar).

- TheRegressionStabilityTestWizardappears.Selecttheinputcellsrangefordataset1anddata
set2.Specifytheinputmask:

- IntheOptionsandMissingValuestabs,acceptthedefaults.
- ClickOK.
- TheChowtesttableisgenerated.

Regression202Tutorial 4 SpiderFinancialCorp,2013

TheChowtestaccepts(ordoesnotreject)thenullhypothesisthatthevaluesofthecoefficientsare
statisticallyindifferentintheentiredataset.
Conclusion
Inthistutorial,weexploredthestabilityoftheregressionintheinputsampledata.
Basedonourfinding,themodelcanbeusedfordeliveringaforecastusingoneexplanatoryvariable(i.e.
extroversion).

Finally,wemaywonderwhetherwecanstillimprove(i.e.reducetheregressionerror)bycombiningthe
twoexplanatoryvariables(intelligenceandextroversion)?
Answer:Maybe,butthisisatopicforadifferentseriesspecificallyprincipalcomponentregression
(PCR).
$1,500
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