Regression

R2 represents the fit of the data. How much does the model explain the variation in the dependent
variable. Any R2 above 0.5 is considered a good fit.

Durbin Watson represents the autocorrelation of the data. This means that there will be correlation
between the error terms of the data. This is an undesirable property of regression, because, the
autocorrelation will bias the regression estimates, ie give you wrong predictions.

So check of autocorrelation is done by DW, a value of Durbin Watson around 2 is preferred. If the
DW is below 2, there is positive autocorrelation and if the DW is above 2 means there is negative
autocorrelation. A DW od 2 indicates there is no autocorrelation. The edge values of autocorrelation
are between 0 and 4.

ANOVA

The H0 for Anova test is: The model is not a good fit

Ha: The model is a good fit

Here we do not have F value table, therefore we are looking at the significance value.

P value test- significance test

If the p value is lesser than 0.05 then reject null hypothesis

If p value greater or equal to 0.05, accept the null hypothesis

Colliniearity Statistics

To test whether there is heteroskedasticity of data. Hsk is the residuals are cone shaped, that is they
are showing a positive or a negative trend (cone ) with the data. This is also bad for estimates and
predictions because they give biased estimates. If the value of VIF is greater than 10, the data is HSK.

Tolerance = 1/VIF

VIF = Variance Inflation Factor.

Regression Equation

Y =a +b1X1+ b2X2+b3X3+e

Salary = 17.143 +1.589 *(No of Years) + 3.643 * (Gender) – 0.89 * (Gen*no of years) + E

Significance

Constant
Ho : The constant is not significant

Ha: The constant is significant

P value test is

If p <0.05, we reject the null

If P >= 0.05, we accept the null

Constant is significant

Gender is significant

No of years of experience is significant

Interaction between gender and no of years is not significant.

FACTOR ANALYSIS

KMO Test

This checks the adequacy of the data to conduct the factor analysis. If the value of KMO is above 0.5,
we can proceed to conduct the factor analysis.

Bartlett’s test of Sphericity

H0: The correlation matrix is an identity matrix, we cannot proceed with factor analysis

Ha: The correlation matrix is not an identity matrix, we can proceed with factor analysis

P value test

If p <0.05, we reject the null

If P >= 0.05, we accept the null

Communalities

A communality is the extent to which an item correlates with all other items. Higher communalities are
better. If communalities for a particular variable are low (between 0.0-0.4), then that variable may
struggle to load significantly on any factor.

No Communalities are below 0.4, therefore, the extraction results will be good.

Factor Extraction

Any factor with an eigen value greater than 1 is extracted. The total variance of extraction in this
case is typed in the last column, last row and the individual variances explaned by each factor are
in the 2nd last column, each row.

Scree Plot

Whereever there is a tight bend, there you stop extraction. Here the tight bend cannot be
recognized, therefore we take the eigen value which is represented in the y axis, eigen value>1,
we extract. Therefore we are extracting 6 factors here.
Communalities will be represented as H2. Rotated component matrix values will be given as p1, p2
etc. F1, f2 – factor1, factor2.

Rotated Component Matrix

Here we are extracting component with a value greater the 0.5 (take modulus/absolute values)

1st factor – Convenience features, Driving Pleasure, Colors Available, Safety

2nd factor – engine capacity, fuel efficiency, running and maintenance cost, economical

3rd factor – brand name, after sales service, performance information available

4th factor – purpose of purchase, car image and positioning, advertising and marketing

5th factor – price on road, discount scheme, resale value

6th factor – looks and design

Latent Constructs

Name that you can give for each of the factor extracted

1st factor – Consumer preference

2nd factor – technical efficiencies

3rd factor – value addition

4th factor – marketing

5th factor – price

6th factor - glamour

Box’s Test of Cov Matrix

Ho: The covariance matrix of the three types of flowers are not different (same)

Ha: The covariance matrix of the three types of flowers are different

P test value

If sig. is < 0.05, then reject the null

If sig. is >=0.05 , then do not reject null

Wilks Lambda

H0: There is no discriminating power for the 4 variables (PL, PW, SL, SW)

Ha: There is discriminating power for the 4 variables (PL, PW, SL, SW)
P test here

If sig. is < 0.05, then reject the null

If sig. is >=0.05 , then do not reject null

Standardized discriminant function coefficient works similar to regression coefficients

This helps to write out the discriminant function

1st Function

D1 =0.608PW + 0.887PL-0.518SW-0.359SL

2nd Function

D2 = 0581PW-0.431PL+0.695SW+0.093SL

1st Function

Flower 0 (Mean Discriminant value) Flower 2 Flower 1

(-7.218) (1.822) (5.396)

2nd Function

Flower 2 Flower 0 Flower 1

-0.728 0.206 0.522

Function 1 has more variance between the three types of flowers, therefore, function 1 is a better
discriminant function.

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