Module 4 – SLP
MULTIVARIATE ESTIMATION AND MODEL FIT
Assume once again that you are a consultant who works for the Diligent Consulting Group. You are continuing to work on the analysis of the customer database from Modules 1 through 3.
SLP Assignment Expectations
Complete the following tasks in the Module 4 SLP assignment template:
- Compare the coefficients of determination (r-squared values) from the two linear regressions: simple linear regression from Module 3 Case and the multivariate regression from Module 4 Case. Which model had the best fit?
- Calculate the residual for the first observation from the simple linear regression model. Recall, the Residual = Observed value – Predicted value or e = y ?.
- What happens to the overall distance between the best fit line and the coordinates in the scatterplot when the residuals shrink?
- What happens to the coefficient of determination when the residuals shrink?
- Consider the r-squared from the linear regression model and the r-squared from the multivariate regression model. Why did the coefficient of determination change when more variables were added to the model?
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