Chapter 18: Model Building

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Lessons

Question 1 ~ Part 1 (Preview)

Length: 4 minutesAuthor: JasonComplexity: Standard

This is the most complex regression model we’ve seen so far. It includes squared variables (also known as second order), the regular first-order variables, and an interaction term. I discuss here how to write this out using the output as a guide.

Question 1 ~ Part 4-5

Length: 19 minutesAuthor: JasonComplexity: Hard

PART 4 asks us to test the overall validity of the model, or stated more simply do the independent variables (taken as a group) help to predict the annual sales. In PART 5 we are given the values of the independent variables and must provide an actual estimation of sales. This is a question that MANY students get wrong.

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Question 2bc

Length: 9 minutesAuthor: JasonComplexity: Standard

Part (b) asks us for the POPULATION regression model, while part (c) is looking for the SAMPLE regression model. Learn what the difference is - and how to write both when working with indicator (dummy) variables.

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Question 2d

Length: 13 minutesAuthor: JasonComplexity: Standard

Working with the coefficients of indicator variables can be confusing. The test of slope requires a new interpretation. I show you how the new wording connects with what you learned in simple and multiple linear regression.

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Question 2e

Length: 13 minutesAuthor: JasonComplexity: Easy

Just like with the test of slope, interpreting the coefficient of an indicator variable requires new wording to get it right. Remember - indicator variables are not simply nominal variables, they are BINARY nominal variables.

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Question 2f

Length: 2 minutesAuthor: JasonComplexity: Easy

Here we complete the test of the hypotheses created in part (d) using a 5% significance level. These tests will tell us whether or not there is a difference between the category represented by an indicator variable and the 'missing' category discussed in part (a)

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