MGEB12 – Quantitative Methods in Economics-II

Sample Final

Instructions: This is a closed book test. A formula sheet is attached. You are allowed the use
of a calculator.
Write your full name and your student ID # on both this test book as well as the
Scantron paper.

You have 150 Minutes.

Good Luck!
Last
Name:

First
Name:

ID

FOR MARKERS ONLY:

MC Q-1 Q-2 Q-3 Total

Marks Earned

Maximum Marks
60 12 12 18 100
Possible

The University of Toronto's Code of Behaviour on Academic Matters applies to all

University of Toronto Scarborough students. The Code prohibits all forms of
academic dishonesty including, but not limited to, cheating, plagiarism, and the use of
unauthorized aids. Students violating the Code may be subject to penalties up to and
including suspension or expulsion from the University.
 Part A (Long Questions)
Question-1 [12 Points] In a study of the relationship between temperament and personality, 49
female school students who had a high level of reactivity (HRL) and 54 students who had a low
level of reactivity (LRL) were classified according to their attitude to group pressure with the
following results.

Attitude
Submissive Resistant
HRL 33 16
LRL 12 42

a) [3 points] Is resistance to group pressure significantly lower in the HRL group than the LRL
group?

b) [2 Points] Determine a 99% confidence interval for the difference between the proportions of
resistant females in the HRL and LRL populations.

c) [3 points] Suppose you want to draw another two samples and recalculate your confidence
interval as in part (b) but now you want both samples to be equal. Choose the minimum sample
size if you want the margin of error for the 99% confidence interval to be within 0.2.

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Question-2 [12 Points] A medical statistician is interested in determining whether there is a
relationship between number of packs of cigarettes smoked per day (X) and longevity (in years)
(Y):

Longevity 80 70 72 70 68 65 69 60 58 55
Number of Packs 0 0 1 1 2 2 3 3 4 4
of Cigarettes

 X = 20  X 2
= 60  Y = 667  Y 2
= 44983  XY = 1247

a) [4 Points] Find the regression line and interpret the intercept and slope coefficients.

b) [4 Points] Make an inference about the longevity of an individual who smokes 4 packs of
cigarettes a day. [Use  = 0.05 for the interval.]

c) [4 Points] A scientist claims that based on the estimated slope of this regression, a one-pack
increase in cigarette consumption is associated with more than 2.5 year reduction in the longevity.
Test this claim at a 1% significance level.

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Problem-3 [16 Points] You manage an airline and you are interested to utilize multiple regression
analysis to make pricing decisions on the sale of airline tickets. The consumer market is made up
of three components: those who purchase first-class tickets, those who purchase 21-day advanced
tickets, and those who purchase regular tickets within 21 days of the scheduled flight. Based on
daily reservation data for 100 days, you have estimated the following equation:

Q = 400 - .5PRICE + .2PCOM + .4FLIGHTS - 10FIRSTCLASS - 8ADVANCE

(.109) (.065) (.045) (.956) (3.74)

where:

Q: is the number of reservations per day (in 00s)

PRICE: is the average price of a roundtrip ticket (in dollars)
PCOM: is the average price of a roundtrip ticket for competing airlines (in dollars)
FLIGHTS: is the number of flights per day.
FIRSTCLASS: is a dummy variable equal to one if the reservation was for a first-class ticket
ADVANCE: is a dummy variable equal to one if the reservation was for an advanced 21-day
purchase

Adjusted-R2 = 0.56

Standard error of the estimate: 70

Standard error of the coefficients are in parentheses

a) [4 points] Explain the meaning of the coefficients of the estimated equation.

b) [6 Points] Write the ANOVA table including SS, MS and conduct a significance test on the
overall regression at 5%.

c) [2 points] Suppose the current average price of a roundtrip ticket is $250, the average price of a
competing airlines' roundtrip ticket is $300, and that we average 150 flights per day. Determine the
point estimate of the number of regular reservations the airline can expect each day.

d) [2 points] Based on a 1% significance test, which variables are significantly correlated with
reservations?

e) [2 points] How do the number of regular tickets, first-class tickets, and advance tickets sold
each day compare with each other?

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 Part B (Multiple Choice)
For the following 20 questions, choose the most correct answer and mark it on the
SCANTRON form:

1. Which of the following is not correct?

A. The selection of  controls the probability of Type I error

B. The selection of sample size controls the probability of Type II error.
C. The power of a test depends on the difference between the null and the alternative.
D. The p-value measures the probability that the null hypothesis is true.
E. The rejection region is controlled by the level of significance level.

2. For a normal population with a known variance, suppose that an investigator believes that
approximately 95% values are between 38 and 70. The appropriate sample size for estimating the
true population mean μ within 2 units with 95% confidence level is approximately:

A. 64
B. 43
C. 35
D. 28
E. None of the above

Question 3-4: The data set contains 66 ceramic strength measurements for two batches of material.
The summary statistics for each batch are shown below.

Sample Size Mean Standard Deviation

BATCH 1 25 68.9 6.56
BATCH 2 41 61.1 4.91

3. The 95% confidence interval for the population variance of BATCH 1 is:

A. [26.24, 83.28]
B. [28.36, 65.96]
C. [21.35, 88.29]
D. [32.12, 43.18]
E. None of the above

4. If we test for the equality of the variance of the two batches, the p-value of the test would be
closest to:

A. 4.9%
B. 5.1%
C. 6.2%
D. 8.8%
E. 10.3%

5. A newspaper conducted a province-wide survey concerning the 2007 provincial election. The
newspaper took a random sample of 1200 registered voters and found that 620 would vote for

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Candidate A. Assuming that the province has a population of 11.5 million, the 95% confidence
interval for the number of voters who vote for Candidate A is:

A. [5,616,511 6,266,823]
B. [5,128,088 6,324,534]
C. [5,672,134 6,322,412]
D. [5,569,341 6,591,104]
E. [5,668,768 6,214,566]

6. An archer claims that 25% of her shots will be in the center of the target (i.e., a bulls-eye). A
sports writer plans to test this claim by sampling 300 shots. If the 300 shots result in 60 or fewer
bulls-eyes (i.e., 20% bulls-eyes), the writer will reject the archer's claim. What is the probability
that the sports writer will reject the archer's claim, when it is actually true?

A. 0.16
B. 0.08
C. 0.04
D. 0.02
E. 0.01

7. If the 95% confidence interval for a population proportion is [0.53, 0.59] then the sample size
must be closest to:

A. 263
B. 785
C. 531
D. 348
E. 1052

8. A normal population has a population standard deviation of 10. The hypotheses about the
population mean, H0: µ = 20 versus H1: µ > 20 are to be tested. A random sample of 100
observations will be selected and the sample mean is denoted by x . Suppose the p-value is 0.011,
the value of x must be closest to:

A. 20.19
B. 22.30
C. 23.12
D. 24.11
E. 24.31

9. Two procedures are used to treat a certain disease. To compare the success rates of the two
procedures, a random sample from each type of procedure is obtained, and the results are
recorded as follows:

Sample Size Cured

Procedure A 100 78
Procedure B 120 102

A 95% confidence interval for the difference in success rates is:

Page 6 of 19
A. .07 ± .053
B. .07 ± .0054
C. .07 ± .103
D. .07 ± .115
E. .07 ± .059

10. The statistics x i = 4593 and x 2

i = 1005,187, were obtained from a sample of 21
autoworkers. The lower and upper limit for the 99% confidence interval for the population
variance is.

A. 7.32 and 41.81

B. 11.31 and 62.73
C. 12.44 and 71.61
D. 15.81 and 85.10
E. None of the above

11. A study of 1,000 students gave the following results:

X = 10 : average number of hours studied, S X = 4.8 hours;

Y = 65 : average mark in the final, S Y = 15.36 marks;
rX ,Y = 0.75

The estimated average for a student who studied 20 hours is:

A. 77
B. 80
C. 83
D. 86
E. 89

12. A researcher is studying factors related to income. Two of the variables in the data available
to the researcher are FEMALE and MALE. FEMALE = 1 if person is a female and 0 otherwise.
MALE = 1 if person is MALE. The researcher has estimated the following regression where
INCOME_HAT is the predicated income:

INCOME_HAT = 12.31 - 2.13*FEMALE

What would the estimates be if instead of FEMALE the researcher includes MALE?

A. INCOME_HAT = 14.44 +2.13*MALE

B. INCOME_HAT = 12.31 + 2.13*MALE
C. INCOME_HAT = 14.44 – 2.13*MALE
D. INCOME_HAT = 10.18 + 2.13*MALE
E. None of the above

Questions 13-15: The following computer output provides partial results from a regression of y
on X1 and X2, where: y = monthly advertising expense for a given firm (in $1000 units), X1 = the

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firm's annual sales (in $1 million units), and X2 = the firm's market share (in percent units -
numbers between zero and 100!).

ANOVA
Sum of Mean

Source DF SS MS F
Regression 2 ? ? ?
Error ? 2259 ?
Total 24 ?

R2: ?
Adj R2: 0.7130
Parameter Estimates

Variable Coefficient SE t P-value

Intercept -12.65 2.35 ?
X1 ? 1.29 2.41
X2 17.1 ? ? 0.05

13. The value and the meaning of the estimated slope coefficient on X1 is:

A. 1.868, for $1 million rise in sales we expect advertising to rise by $1,868.

B. 1.868, for $1 rise in sales we expect advertising to rise by $0.187.
C. 3.109, for $1 rise in sales we expect advertising to rise by $0.311.
D. 3.109, for $1 million rise in sales we expect advertising to rise by $3,109.
E. Not enough information to answer the question.

14. The standard error for the estimated slope parameter on X2 is:

A. 9.959
B. 8.245
C. 7.109
D. 6.123
E. 5.421

15. Suppose if y is regressed on X1 alone, the R2 in that model is 0.7205. This indicates that the
addition of X2:

A. Improved the model.

B. Did not improve the model
C. The model suffers from multicollinearity hence one cannot make an assessment based on the
information provided.
D. The model suffers from autocorrelation hence one cannot make an assessment based on the
information provided
E. The model suffers from heteroscedasticity hence one cannot make an assessment based on the
information provided

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16. You are given an R2 value of 56.9% and the following very incomplete ANOVA table.

Source DF SS MS F
Regression 1 ? ?
Error 5 ? ?
Total 6 28

The estimated variance of the residuals is:

A. 12.068
B. 1.553
C. 2.413
D. 5.825
E. Cannot be determined based on the information given

17. Net income (X1) and family size (X2) has been used to explain families’ annual food
expenditures. The resulting regression equation is: Yˆ = 2.363 X1 – 1.024 X2. The 2 independent
variables, net income and family size have a correlation r12 = 0.912:

A. This regression suffers from the problem of multicollinearity

B. This regression produces relatively higher standard errors for the coefficients.
C. This regression will yield low t-statistics for both X1 and X2.
D. The regression will improve if either X1 or X2 is dropped from the regression.
E. All of the above.

Questions 18 – 20: The following are partial computer output of a multiple regression of hourly
labour earning [a typical working day has 8 hours] of a sample of 45 on experience, education as
well as the gender and race of the worker.

Exp: Years of Experience

Edu1: (1 if finished high school 0 otherwise)
Edu2: (1 if finished undergraduate 0 otherwise)
Edu3: (1 if finished postgraduate 0 otherwise)
Race: (1 if White, 0 otherwise)
Sex: (1 if Female, 0 otherwise)

Variable Coefficient Standard Error

Intercept 7 2.7
Exp 1.1 0.4
Edu1 1.3 0.6
Edu2 3.5 1.3
Edu3 4.6 1.4
Race 1.7 0.8
Sex -0.6 0.2
Race*Sex 0.3 0.3

Adj-R2 = 0.31

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18. The F-statistic for the significance of regression is approximately?
A. 6.59
B. 5.94
C. 4.50
D. 3.52
E. None of the above

19. The predicted earning for a white male with an undergraduate degree and 10 years of
experience is:

A. 16.2
B. 19.7
C. 22.5
D. 23.2
E. 23.8

20. Everything else equal what would be the expected earning differential between a white male
postgraduate and a white female high school graduate?

A. 3.6
B. 3.9
C. 4.7
D. 2.4
E. None of the above

Page 10 of 19
Page 11 of 19
Page 12 of 19
Page 13 of 19
 F-table (=2.5%)
Degrees of Freedom for Numerator (1)

(2) 1 2 3 4 5 6 7 8 9 10 12 15 20 24 30 40 60 120

2 38.5 39.0 39.2 39.2 39.3 39.3 39.4 39.4 39.4 39.4 39.4 39.4 39.4 39.5 39.5 39.5 39.5 39.5 39.5

4 12.2 10.6 9.98 9.60 9.36 9.20 9.07 8.98 8.90 8.84 8.75 8.66 8.56 8.51 8.46 8.41 8.36 8.31 8.26

6 8.81 7.26 6.60 6.23 5.99 5.82 5.70 5.60 5.52 5.46 5.37 5.27 5.17 5.12 5.07 5.01 4.96 4.90 4.85

8 7.57 6.06 5.42 5.05 4.82 4.65 4.53 4.43 4.36 4.30 4.20 4.10 4.00 3.95 3.89 3.84 3.78 3.73 3.67

10 6.94 5.46 4.83 4.47 4.24 4.07 3.95 3.85 3.78 3.72 3.62 3.52 3.42 3.37 3.31 3.26 3.20 3.14 3.08

12 6.55 5.10 4.47 4.12 3.89 3.73 3.61 3.51 3.44 3.37 3.28 3.18 3.07 3.02 2.96 2.91 2.85 2.79 2.73

14 6.30 4.86 4.24 3.89 3.66 3.50 3.38 3.29 3.21 3.15 3.05 2.95 2.84 2.79 2.73 2.67 2.61 2.55 2.49

16 6.12 4.69 4.08 3.73 3.50 3.34 3.22 3.12 3.05 2.99 2.89 2.79 2.68 2.63 2.57 2.51 2.45 2.38 2.32

18 5.98 4.56 3.95 3.61 3.38 3.22 3.10 3.01 2.93 2.87 2.77 2.67 2.56 2.50 2.44 2.38 2.32 2.26 2.19

20 5.87 4.46 3.86 3.51 3.29 3.13 3.01 2.91 2.84 2.77 2.68 2.57 2.46 2.41 2.35 2.29 2.22 2.16 2.09

22 5.79 4.38 3.78 3.44 3.22 3.05 2.93 2.84 2.76 2.70 2.60 2.50 2.39 2.33 2.27 2.21 2.14 2.08 2.00

23 5.75 4.35 3.75 3.41 3.18 3.02 2.90 2.81 2.73 2.67 2.57 2.47 2.36 2.30 2.24 2.18 2.11 2.04 1.97

24 5.72 4.32 3.72 3.38 3.15 2.99 2.87 2.78 2.70 2.64 2.54 2.44 2.33 2.27 2.21 2.15 2.08 2.01 1.94

25 5.69 4.29 3.69 3.35 3.13 2.97 2.85 2.75 2.68 2.61 2.51 2.41 2.30 2.24 2.18 2.12 2.05 1.98 1.91

26 5.66 4.27 3.67 3.33 3.10 2.94 2.82 2.73 2.65 2.59 2.49 2.39 2.28 2.22 2.16 2.09 2.03 1.95 1.88

27 5.63 4.24 3.65 3.31 3.08 2.92 2.80 2.71 2.63 2.57 2.47 2.36 2.25 2.19 2.13 2.07 2.00 1.93 1.85

28 5.61 4.22 3.63 3.29 3.06 2.90 2.78 2.69 2.61 2.55 2.45 2.34 2.23 2.17 2.11 2.05 1.98 1.91 1.83

29 5.59 4.20 3.61 3.27 3.04 2.88 2.76 2.67 2.59 2.53 2.43 2.32 2.21 2.15 2.09 2.03 1.96 1.89 1.81

30 5.57 4.18 3.59 3.25 3.03 2.87 2.75 2.65 2.57 2.51 2.41 2.31 2.20 2.14 2.07 2.01 1.94 1.87 1.79

40 5.42 4.05 3.46 3.13 2.90 2.74 2.62 2.53 2.45 2.39 2.29 2.18 2.07 2.01 1.94 1.88 1.80 1.72 1.64

60 5.29 3.93 3.34 3.01 2.79 2.63 2.51 2.41 2.33 2.27 2.17 2.06 1.94 1.88 1.82 1.74 1.67 1.58 1.48

120 5.15 3.80 3.23 2.89 2.67 2.52 2.39 2.30 2.22 2.16 2.05 1.94 1.82 1.76 1.69 1.61 1.53 1.43 1.31

5.02 3.69 3.12 2.79 2.57 2.41 2.29 2.19 2.11 2.05 1.94 1.83 1.71 1.64 1.57 1.48 1.39 1.27 1.00

Page 14 of 19
 F-table (=5%)
Degrees of Freedom for Numerator (1)

(2) 1 2 3 4 5 6 7 8 9 10 12 15 20 24 30 40 60 120

2 18.5 19.0 19.2 19.2 19.3 19.3 19.4 19.4 19.4 19.4 19.4 19.4 19.4 19.5 19.5 19.5 19.5 19.5 19.5

4 7.71 6.94 6.59 6.39 6.26 6.16 6.09 6.04 6.00 5.96 5.91 5.86 5.80 5.77 5.75 5.72 5.69 5.66 5.63

6 5.99 5.14 4.76 4.53 4.39 4.28 4.21 4.15 4.10 4.06 4.00 3.94 3.87 3.84 3.81 3.77 3.74 3.70 3.67

8 5.32 4.46 4.07 3.84 3.69 3.58 3.50 3.44 3.39 3.35 3.28 3.22 3.15 3.12 3.08 3.04 3.01 2.97 2.93

10 4.96 4.10 3.71 3.48 3.33 3.22 3.14 3.07 3.02 2.98 2.91 2.85 2.77 2.74 2.70 2.66 2.62 2.58 2.54

12 4.75 3.89 3.49 3.26 3.11 3.00 2.91 2.85 2.80 2.75 2.69 2.62 2.54 2.51 2.47 2.43 2.38 2.34 2.30

14 4.60 3.74 3.34 3.11 2.96 2.85 2.76 2.70 2.65 2.60 2.53 2.46 2.39 2.35 2.31 2.27 2.22 2.18 2.13

16 4.49 3.63 3.24 3.01 2.85 2.74 2.66 2.59 2.54 2.49 2.42 2.35 2.28 2.24 2.19 2.15 2.11 2.06 2.01

18 4.41 3.55 3.16 2.93 2.77 2.66 2.58 2.51 2.46 2.41 2.34 2.27 2.19 2.15 2.11 2.06 2.02 1.97 1.92

20 4.35 3.49 3.10 2.87 2.71 2.60 2.51 2.45 2.39 2.35 2.28 2.20 2.12 2.08 2.04 1.99 1.95 1.90 1.84

22 4.30 3.44 3.05 2.82 2.66 2.55 2.46 2.40 2.34 2.30 2.23 2.15 2.07 2.03 1.98 1.94 1.89 1.84 1.78

23 4.28 3.42 3.03 2.80 2.64 2.53 2.44 2.37 2.32 2.27 2.20 2.13 2.05 2.01 1.96 1.91 1.86 1.81 1.76

24 4.26 3.40 3.01 2.78 2.62 2.51 2.42 2.36 2.30 2.25 2.18 2.11 2.03 1.98 1.94 1.89 1.84 1.79 1.73

25 4.24 3.39 2.99 2.76 2.60 2.49 2.40 2.34 2.28 2.24 2.16 2.09 2.01 1.96 1.92 1.87 1.82 1.77 1.71

26 4.23 3.37 2.98 2.74 2.59 2.47 2.39 2.32 2.27 2.22 2.15 2.07 1.99 1.95 1.90 1.85 1.80 1.75 1.69

27 4.21 3.35 2.96 2.73 2.57 2.46 2.37 2.31 2.25 2.20 2.13 2.06 1.97 1.93 1.88 1.84 1.79 1.73 1.67

28 4.20 3.34 2.95 2.71 2.56 2.45 2.36 2.29 2.24 2.19 2.12 2.04 1.96 1.91 1.87 1.82 1.77 1.71 1.65

29 4.18 3.33 2.93 2.70 2.55 2.43 2.35 2.28 2.22 2.18 2.10 2.03 1.94 1.90 1.85 1.81 1.75 1.70 1.64

30 4.17 3.32 2.92 2.69 2.53 2.42 2.33 2.27 2.21 2.16 2.09 2.01 1.93 1.89 1.84 1.79 1.74 1.68 1.62

40 4.08 3.23 2.84 2.61 2.45 2.34 2.25 2.18 2.12 2.08 2.00 1.92 1.84 1.79 1.74 1.69 1.64 1.58 1.51

60 4.00 3.15 2.76 2.53 2.37 2.25 2.17 2.10 2.04 1.99 1.92 1.84 1.75 1.70 1.65 1.59 1.53 1.47 1.39

120 3.92 3.07 2.68 2.45 2.29 2.18 2.09 2.02 1.96 1.91 1.83 1.75 1.66 1.61 1.55 1.50 1.43 1.35 1.25

3.84 3.00 2.60 2.37 2.21 2.10 2.01 1.94 1.88 1.83 1.75 1.67 1.57 1.52 1.46 1.39 1.32 1.22 1.00

Page 15 of 19
 Formula sheet
Inference about  when  2 known:

X − 
Test statistic: z= CI estimator: X  z / 2
 n n
z  
2
Sample size to estimate  ±  : n =   /2 
  
Inference about  when  2 unknown:
X − s
Test statistic: t= CI estimator: X  t / 2
s n n
 = n −1
Inference about p (population proportion):

pˆ − p
Test statistic: z= CI estimator: pˆ  z / 2 pˆ (1 − pˆ ) / n
p(1 − p) / n
2
z pˆ (1 − pˆ ) 
Sample size to estimate p ±  : n =   / 2 
  

n=
( z + z B )  2
2

( 0 −  a ) 2
Sample Size for Beta error:

Inference about (μ 1 – μ 2) when  12 =  22:

( X 1 − X 2 ) − ( 1 −  2 )
Test statistic: t= where
sP2 sP2
+
n1 n2
(n1 − 1) s12 + (n2 − 1) s22
s =
2
n1 + n2 − 2
P

sP2 sP2
CI estimator: ( X 1 − X 2 )  t / 2 + DF = n1 + n2 − 2
n1 n2

Page 16 of 19
Inference about (μ 1 – μ 2) when  12 ≠  22:

( X 1 − X 2 ) − ( 1 −  2 )
Test statistic: t= CI estimator:
s12 s22
+
n1 n2
DF =
(s 2
1 n1 + s22 n2 )
2

( X 1 − X 2 )  t / 2
s12 s22
+ (s2
1 n1
+
) (
2
s22 n2 )
2

n1 n2 n1 − 1 n2 − 1

Inference about p1 – p2:

Test statistic:
z=
( pˆ1 − pˆ 2 ) − ( p1 − p2 )
[H0: (p1 – p2) = 0]
1 1
pˆ (1 − pˆ ) + 
 n1 n2 

pˆ1 (1 − pˆ1 ) pˆ 2 (1 − pˆ 2 )
CI estimator: ( pˆ1 − pˆ 2 )  z / 2 +
n1 n2

Inference about 𝝈𝟐 :
Test statistics:
(𝒏−𝟏)𝒔𝟐
[H0: 𝝈𝟐 = 𝝈𝟐𝟎 ] 𝝌𝟐𝒏−𝟏 = 𝝈𝟐

(𝒏−𝟏)𝑺𝟐 (𝒏−𝟏)𝑺𝟐
CI estimator: < 𝝈𝟐 <
𝝌𝟐𝜶/𝟐 𝝌𝟐 𝜶
(𝟏− )
𝟐

𝝈𝟐
Inference about 𝟏⁄ 𝟐 :
𝝈𝟐
Test statistics:

𝑺𝟐
[H0: 𝝈𝟐𝟏 = 𝝈𝟐𝟐 ] 𝑭𝒏𝟏 −𝟏,𝒏𝟐−𝟏 = 𝑺𝟏𝟐
𝟐

Simple Linear Regression

Shortcuts:

Page 17 of 19
  (x −X)
n
2
1 n 
1  n 2 
ii
i
s = i =1
=  xi − nX 2  s XY = x y − n XY
n − 1  i =1 
2

n −1 
n − 1  i =1  
SIMPLE REGRESSION: yi =  + xi +  i
S xy
Least squares line / linear regression line: yˆ = a + bx b= a = y − bx
s x2

Standard error of estimate: Standard error of least squares slope

estimate:
SSE s
s=
SSE
s2 = sb =
n−2 n−2 (n − 1) s x2
Test statistic & confidence interval estimator for β:
b−
t= b  t / 2 sb DF = n − 2
sb
Prediction Interval for y for a given value of x (xg): Confidence Interval for expected
value of y given x (xg):

1 ( xg − X ) 1 ( xg − X )
2 2
yˆ  t / 2 s 1 + + yˆ  t / 2 s +
n (n − 1) s x2 n (n − 1) s x2
Simple & Multiple Regression
n n n n
SST =  ( yi − y ) 2 SSR =  ( yˆ i − y ) 2 SSE =  ei2 =  ( y − yˆ i i ) 2
i =1 i =1 i =1 i =1

SST = SSR + SSE

SSR SSE
Coefficient of Determination: R2 = R2 = 1 −
SST SST
SSE
R2 = 1 − n
 ( yi − y ) 2
i =1

MULTIPLE REGRESSION: yi =  + 1 x1i +  2 x2i +  +  k xki +  i

Standard error of estimate:

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 n

SSE
 (ei − 0) 2 SSE
i =1
s= s2 = =
n − k −1 n − k −1 n − k −1
SSE (n − k − 1)
Adj. R 2 = 1 −
 ( yi − y ) (n − 1)
2

Test statistic & confidence interval estimator for βj:

bj −  j
t= b j  t / 2 s b v = n − k −1
sb j
j

Test of overall statistical significance of linear regression model:

R /k 2
( SST − SSE ) / k
F= F =
(1 − R 2 ) /( n − k − 1) SSE /( n − k − 1)
SSR / k
F=
SSE /( n − k − 1)
Numerator degrees of freedom: k
Denominator degrees of freedom: n − k −1

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