Question

Question 9. Results of the three goodness of test measures is given in the table below:

Goodness of Fit Tests
R Square	0.93		ANOVA	F	Sig F
				25.431	0.0008
	Coefficients	St.Error	t Stat	P-value
Intercept	-35.25	7.05	-4.996	0.002
Training	2.47	0.64	3.851	0.008
Performance	8.20	1.20	6.824	0.000
Years of Service	1.1	0.42	2.592	0.041

a) Do the independent variables explain a reasonable amount of variation in the dependent variable? Justify.

  

b) Can any of the independent variables be dropped from the model? Why or why not?

c) Use information in the table to comment on the validity of the model.

Question 10. What recommendation would you provide to Fatima for building the new compensation package?

Answer 1

(a) The independent variables explain 93% of the variation in the dependent variable since R-sq=0.93, which is quite high. So yes.

(b) None of the dependent variables can be dropped. Look at the p-values for each of the variables. All are lower than 0.05. hence all the variables effect the response variable significantly. So, none should be dropped.

(c) Look at the ANOVA F statastic value.

The F-test of the overall significance is a specific form of the F-test. It compares a model with no predictors to the model that you specify

The hypotheses for the F-test of the overall significance are as follows:

• Null hypothesis: The fit of the intercept-only model and your model are equal.
• Alternative hypothesis: The fit of the intercept-only model is significantly reduced compared to your model.

Here the p-value of your test is much lower than 0.05. hence the alternate hypothesis is true. Thus your model is valid.

As for question 10 I think that it is incomplete.