Suppose you estimate a Linear Regression with quantity of sales as the dependent variable and price...
Suppose you estimate a Linear Regression with quantity of sales as the dependent variable and price and income as independent variables. From this Linear Regression, you get an Adjusted R-squared of 0.2045. When you add the month of the year as an independent variable to the Linear Regression, the Adjusted R- squared is 0.1846. What does this indicate?
a) The Goodness-of-Fit as measured by Adjusted R-squared has gotten better
b) Adding the month of the year as an independent variable must have also decreased R- squared
c) Month of the year doesn’t contribute very much to the Goodness-of-Fit of the Linear Regression
d) The coefficient on month of the year must be statistically significant at the 5% level
Homework Answers
For a addition of variable in a model Rsqaure increase though the variable is not important. But adjusted Rsquare increases only if added variable is important. And decreases if not important.
Ans. C) month of the year doesn't contribuye very much to the goodness of fit of linear regression.
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Suppose you estimate a Linear Regression with quantity of sales
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level.
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