18 March 2019

Collaborative Review Task M2

The models and the related information are restated above. Each of the model’s
coefficient has been derived statistically and needs to be statistically significant. P-value is one
such measure where a p-value less than 0.05 is desired if we are measuring at 5% level of
significance. If the p-value at 5% significance level is greater than 0.05 then we cannot reject
our null hypothesis that the coefficient is statistically different than zero. We observe from the
table that Models 3,4 and 6 have high p-values for the variable x4 indicating that these
models are not fit for use.
Another measure that we use is the goodness of fit which is denoted by R-square and
the Adjusted R-square. R-square indicates how well the independent variables explain the
variation in the independent variable. If the R-square is high that indicates that the
independent variables explain a lot of the variation of the independent variable. But as we
keep on adding the independent variables to our model, the R-square keeps on increasing,
even if the marginal contribution of the new variables is not statistically significant. In order
to counter this problem, we calculate the adjusted R-square. The adjusted R-square is given
as

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 Given the number of observations, we can calculate the adjusted R-square easily. Here,
we do the same by assuming a particular sample size (say 100). This gives us the highest
adjusted R-square for Model 5. The F-statistics are also provided, which measure how well as
a group the independent variables explain the variation in the dependent variable. Simply
put, it is a measure that says at least one of the variables in the model is statistically
significant. Model 2 has a higher F-statistic than Model 5, but given the higher adjusted R-
square value for Model 5, we choose Model 5 as our choice to model the dependent variable
y.

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