6

Regression Analysis

Business Analytics, 1e
By Sanjiv Jaggia, Alison Kelly, Kevin Lertwachara, and Leida Chen

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8/10/2020 written consent of McGraw-Hill Education.
6-1
 6.3: Tests of Significance (1)
• Consider the linear regression model with 𝑘 predictor
variables: 𝑦 = 𝛽0 + 𝛽1 𝑥1 + 𝛽2 𝑥2 + ⋯ + 𝛽𝑘 𝑥𝑘 + 𝜀.
• We can conduct hypothesis tests about the unknown
parameters 𝛽0 , 𝛽1 , 𝛽2 , … , 𝛽𝑘 .
– Joint test about all of the parameters
– Individual tests about a single parameter
• For the tests to be valid, 𝑏0 , 𝑏1 , 𝑏2 , … 𝑏𝑘 must be normally
distributed.
– Satisfied if the random error term 𝜀 is normally distributed
– If 𝜀 is not normally distributed, the tests are valid only for large sample
sizes.

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-2

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 6.3: Tests of Significance (2)

• Example: Model 3 was the preferred model.

• Conduct a hypothesis test to determine if the predictor
variables are jointly significant in explaining earnings.

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-3

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 6.3: Tests of Significance (3)

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-4

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rights reserved.Chen
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 6.3: Tests of Significance (4)
• Example: Model 3 was the preferred model.
• Conduct a hypothesis test to determine whether cost
influences earnings at the 5% significance level.

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-5

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rights reserved.Chen
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 Exercises

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-6

Copyright © 2021 McGraw-Hill Education. AllLertwachara,
rights reserved.Chen
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written consent of McGraw-Hill Education.
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 Exercises

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-7

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rights reserved.Chen
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 Exercises

BUSINESS ANALYTICS, 1e | Jaggia, Kelly, 6-8

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rights reserved.Chen
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written consent of McGraw-Hill Education.
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