Week 4

Question 1

Correlation

Answer 1

Perfect Positive (r=1) – Movement is in the same direction as well a proportion.

Imperfect positive (r >0 - <1) - Movement is in the same direction but in different proportion.

No correlation (r=0) There is no or little correlation.

Perfect Negative (r=-1) Movement is in opposite direction but in the same proportion.

Imperfect Negative (r <0 - >-1) Movement is in opposite direction but in the different
proportion.

Question 2

Regression

Answer 2

is a linear relationship between two variables. One variable is
independent, another is dependent. y is dependent on x.

Intercept: Alpha. What y equals to when x (or all independent variables) is (are) zero.

Slope: Beta.

Model Interpretation: How the independent variable explains the change in the dependent
variable

Question 3

Regression results

Answer 3

R Square: How much % change in the dependent
variable is explained by all or one independent variable.

Slope: If the independent variable increases by 1 (unit of measurement), the dependent
variable will increase or decrease by the slope (unit of measurement). Keeping all the
other factors constant.

t Stat: For Statistical significance
p-value: explanation of statistical significance