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Class 14 (equations can be made using different variables (y c x z…
Class 14
equations can be made using different variables
y c x z
Results
All the variables are not corresponding to y because all the variables have probability above 10%
y c z
Results
Although these variables can have any relation but regression result says that there is no professional on average relationship between z on y because these variables are having t-statistics and probability which are in rejected zone
y c a
Result
a is not corresponding but c is corresponding
y c x/a z/2.3
For Example
no. of hours multiply by 365 etc gives bonus amount etc
If a variable is once in a 10 years then variable/10
If it is annual income then divide it by 12
y c a/z log(a) z/a*7.8 (x8z)/a
complicated variables with multiple compositions
As the indicators increases, they add on their impact on the dependent variable
Adjusted R-square
it is used to describe the impact of more than 2 variables equation
it is compulsory
Adjustment of R-square gives Adjusted R-square
if its % comes low in results then its not a big deal
it shows that the relation between variables is low or none
it is always reliable
impact
individual
impact of one indicator on dependent variable
this individual acceptance is described by co-efficient, t-statistic and probability
collective
impact of all the independent variables (indicators) on dependent variable
R-square describes this impact
it tells about the total correlation of the equation
shown in %
it is used to describe the impact of 2 variable equation
however, 2 variable equation does not exist
there is no need to increase R-square
For Example
it is said that school system leads to development but if the regression results shows that school system leads towards downfall then somebody has to tell this kind of regression even if its R-square is 1%
whatever R-square comes as a result of regression, it has to be accepted
Regression
EViews
Quick
Estimate Equation
y c x
Enter
This is 2 variable equation
y is dependent variable and x is independent variable
Probability
accepted upto 10%
75% chance of getting into the rejection zone is quite high probability
four variable equation is considered as good equation
e.g.