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THE BUSINESS Applied Regression and Modeling Quantitative Approaches
SAHAY
EXPERT PRESS to Decision Making Collection
A Computer Integrated Approach
DIGITAL LIBRARIES
Amar Sahay Donald N. Stengel, Editor
EBOOKS FOR
BUSINESS STUDENTS Applied Regression and Modelling: A Computer Integrated Approach
creates a balance between the theory, practical applications,
Curriculum-oriented, born-
and computer implementation behind Regression—one of the
digital books for advanced
most widely used techniques in analyzing and solving real world
business students, written
problems. The book begins with a
thorough explanation and
by academic thought discussion of Regression Analysis with c
omputer a
pplications.
leaders who translate real- This is followed by Multiple Regression—a widely used tool to
world business experience predict a response variable using two or more predictors. The
into course readings and book emphasizes the use of computers to relieve the analyst of
Applied Regression
reference materials for tedious, repetitive c
alculations and allow the analyst to focus on
students expecting to tackle creating and interpreting successful models. In addition, the book
management and leadership presents complete c
omputer analysis including the interpretation
and Modeling
challenges during their of multiple regression models along with the model adequacy tests
professional careers. and residual analysis using widely used computer software.
Finally, the book extends the concepts to Modeling. Among
POLICIES BUILT
For further information, a and services. He is a senior member of the Institute of Industrial &
Systems Engineers, and a senior member of American Society for
free trial, or to order, contact:
Quality (ASQ).
[email protected]
Quantitative Approaches
www.businessexpertpress.com/librarians
to Decision Making Collection
Donald N. Stengel, Editor
ISBN: 978-1-63157-329-3
Applied Regression and
Modeling
Applied Regression and
Modeling
A Computer Integrated Approach
Amar Sahay
Applied Regression and Modeling: A Computer Integrated Approach
10 9 8 7 6 5 4 3 2 1
Keywords
coefficient of correlation, correlation, dependent variable, dummy vari-
able, independent variable, interaction model, least squares estimates,
least squares prediction equation, linear regression, multiple coefficient
of determination, multiple regression and modeling, nonlinear models,
regression line, residual analysis, scatterplot, second-order model, step-
wise regression
Contents
Preface��������������������������������������������������������������������������������������������������ix
Acknowledgments���������������������������������������������������������������������������������xiii
Computer Software Integration, Computer Instructions, and Data Files��� xv
Bibliography���������������������������������������������������������������������������������������191
Index�������������������������������������������������������������������������������������������������193
Preface
This book is about regression and modeling—one of the most widely
used techniques in analyzing and solving real-world problems. Regres-
sion analysis is used to investigate the relationship between two or more
variables. Often we are interested in predicting one variable using one
or more variables. For example, we might be interested in the relation-
ship between two variables: sales and profit for a chain of stores, n
umber
of hours required to produce certain number of products, number of
accidents versus blood alcohol level, advertising expenditures and sales,
or the height of parents compared to their children. In all these cases,
regression analysis can be applied to investigate the relationship between
the variables.
The book is divided into three parts—(1) prerequisite to regression
analysis followed by a discussion on simple regression, (2) multiple regres-
sion analysis with applications, and (3) regression and modeling including
second-order models, nonlinear regression, regression using qualitative or
dummy variables, and interaction models in regressions. All these sections
provide examples with complete computer analysis and instructions com-
monly used in modeling and analyzing these problems. The book deals
with detailed analysis and interpretation of computer results. This will
help readers to appreciate the power of computer in applying regression
models. The readers will find that the understanding of computer results is
critical to implementing regression and modeling in real-world situation.
The purpose of simple regression analysis is to develop a statistical
model that can be used to predict the value of a response or dependent
variable using an independent variable. In a simple linear regression
method, we study the linear relationship between two variables. For
example, suppose that a Power Utility company is interested in develop-
ing a model that will enable them to predict the home heating cost based
on the size of homes in two of the Western states that they serve. This
model involves two variables: the heating cost and the size of the homes.
x PREFACE
The first part of the book shows how to model and analyze this type of
problem.
In the second part of the book, we expand the concept of simple regres-
sion to include multiple regression analysis. A multiple linear regression
involves one dependent or response variable, and two or more independent
variables or predictors. The concepts of simple regression discussed in the
previous chapter are also applicable to the multiple regression. We provide
graphical analysis known as matrix plots that are very useful in analyzing
multiple regression problems. A complete computer analysis including
the interpretation of multiple regression problems along with the model
adequacy tests and residual analysis using a computer are presented.
In the third part of the book, we discuss different types of models
using regression analysis. By model building, we mean selecting the model
that will provide a good fit to a set of data, and the one that will provide a
good prediction of the response or the dependent variable. In experimen-
tal situations, we often encounter both the quantitative and qualitative
variables. In the model building examples, we will show how to deal with
qualitative independent variables. The model building part also discusses
the nonlinear models including second-order, higher order, and interac-
tion models. Complete computer analysis and interpretation of computer
results are presented with real-world applications. We also explain how to
model a regression problem using dummy variables. Finally, we discuss all
subset regression and stepwise regression and their applications.
The book is written for juniors, seniors, and graduate students in
business, MBAs, professional MBAs, and working people in business and
industry. Managers, practitioners, professionals, quality professionals,
quality engineers, and anyone involved in data analysis, business analyt-
ics, and quality and six sigma will find the book to be a valuable resource.
The book presents an in-depth treatment of regression and model-
ing in a concise form. The readers will find the book easy-to-read and
comprehend. The book takes the approach of organizing and presenting
the material in a way that allows the reader to understand the concepts
easily. The use of computers in modeling and analyzing simple, multi-
ple, and higher order regression problems is emphasized throughout the
book. The book uses the most widely used computer software in data
analysis and quality used in industry and academia. Readers interested in
Preface xi
It certainly was not a bad plan of Barney’s, and one easily worked.
It was a simple enough matter to climb to the top of the cliff.
Barney was all ready for the feat.
“Shure, I think yez had betther dhrop me over yinder in the edge
av the mountain side,” he said. “I don’t think the omadhouns can see
me there.”
“You are right, Barney,” agreed Frank; “that is a very good place.”
The Steam Horse was accordingly sent over quickly to the spot
named.
Here it was possible for Barney to leave the wagon without being
seen by the red foe.
He at once struck out up the mountain side.
He carried two repeating rifles and plenty of ammunition. It was
certain that a surprise party was in store for the Comanches.
Barney was quickly out of sight.
Frank muttered a fervent prayer for his success.
Then he turned the Horse back to the pass, and began firing again
upon the foe.
Frank pushed forward into the pass as far as he dared.
Time passed rapidly.
An hour quickly fled by and the two men in the wagon were getting
impatient, when suddenly Pomp sprang up.
“Look up dar, Marse Frank!” he cried. “See dat?”
He pointed far up to the top of the cliff. A puff of smoke lingered in
the air, and the distant muffled report of a rifle was heard.
Barney had begun work.
The rifle shots became rapid and the effect upon the savages in
the pass was terrific.
Loud yells of discomfiture and rage filled the air.
Of course, Barney from his position could look right down upon
them and pick them off skillfully.
One by one he began to pick off the secreted redskins.
For a while they stood their ground.
It was useless to attempt to reply to the shots as Barney was
entirely out of range or sight.
But the deadly bullets came down in their midst, and every one
fired took a savage off the muster roll.
The Comanches hated to relinquish their position in the pass.
On the other hand, they could not afford to remain in their present
position and be exterminated one by one.
There was no other way but to beat a retreat.
There was no way to send a party up to disperse the foe at once.
It would require too much time.
So with baffled yells the Indians retreated from the pass.
It was now Frank and Pomp’s turn to act.
Leaving the Steam Horse they began work immediately on the
barricade of stones.
Hastily they worked at the herculean task of moving them.
Gradually they made a passage through the obstruction for the
Steam Horse.
Soon Frank was enabled to get aboard and drive the Horse
through. Then a signal was given Barney.
The Celt ceased firing and came down with all haste from his
aerial perch.
He came down in half the time that he had occupied in going up,
and in the meanwhile Frank and Pomp held the Comanches at bay.
“Begorra, didn’t I give thim a foine taste av the law!” cried Barney,
as he came tumbling aboard the wagon. “Shure I think they’ll not thry
that thrick again roight away.”
“I am of the same opinion, Barney,” cried Frank, with a laugh. “It
was quite a surprise for them.”
“Bedad, an’ it was.”
“We’se jes’ pulled out ob dat trap in good shape!” cried Pomp. “Yo’
am got a big head, I’ish.”
“Shure ye’re roight, naygur, but it’s not so hard as yures.”
“If it ain’t it am jes’ as thick yo’ bet,” retorted Pomp.
“We’re out of the trap!” agreed Frank. “But not out of danger. We
will have some fun with the Comanches now.”
Frank sent the Steam Horse ahead at a full gallop.
The Comanches were smarting with defeat and desperate, and did
not hesitate to make an attack.
Riding their ponies like fiends they charged upon the Steam
Horse.
Luckless barbarians! they little weighed the result or anticipated
the consequences.
Nothing could have pleased Frank Reade, Jr., more than this.
He did not attempt to stand his ground.
He adopted his old tactics of running away from the foe and
defeating them while in pursuit.
The Comanches came after the Steam Horse like a whirlwind.
Barney and Pomp, at the rear loopholes, worked the repeaters
and dropped the foe at every shot.
Frank kept the Steam Horse at an easy distance from the savages
and held them there.
It was folly for the savages to try to outfoot the Steam Horse, as
they speedily found out.
They were soon willing to abandon the pursuit and the battle, and
rode away to the southward much discomfited.
Now that the affray was over, our adventurers were given an
opportunity to look about and see where they were.
Looking to the westward, the mighty depression or sink, known as
the Great Basin, could be seen sloping downward.
To the southward was the range of hills which formed the curious
inclosed valley.
These hills were of fantastic shapes, and the vegetation was of a
stunted and unprolific kind.
It was easy to realize that they were really in the great American
desert. To the northward lay the mighty sandy waste which is fitly
called the American Sahara.
Many a traveling party of explorers or prospectors had drifted out
upon that arid waste and succumbed.
Even as caravans had perished in the great Sahara so had the
American desert claimed its victims.
All gazed upon the scene spread before them with a profound
impression of the importance of this fact.
Frank Reade, Jr., did not fear the desert with the Steam Horse, for
he felt that at full speed he could quickly cross it.
Yet he gazed upon the sandy waste with deep interest.
The Comanches had gone from sight beyond the horizon long
since.
“Well,” said Frank, drawing a deep breath, “here we are in the
desert, and it is somewhere in this region that Bert Mason is located.
I would like to know just where.”
“Begorra, it can’t be out yonder in that pile av sand, Misther
Frank,” said Barney.
“No, Barney!” agreed Frank. “It probably is not there.”
“I jes’ tole yo’ dat if dar am any livin’ man in dis yer paht ob de
worl’ he am ober yonder ways,” declared Pomp.
The darky pointed to a distant range of hills, to the southward of
the depression of the Great Basin.
“I believe you’re right, Pomp,” agreed Frank. “We will go thither.”
Accordingly the Steam Horse was turned in that direction.
Across the plain they ran quickly.
As they drew nearer the hills, a long stretch of barren country was
seen reaching to the southwest.
The sun’s hot rays glinted across it with dazzling radiance.
The earth seemed baked to the hardness of brick, and great
waves of heat could be seen with the naked eyes emanating from it.
Across this dreary sun-burned waste a horseman was making his
way at a slow canter.
At sight of him Frank closed the throttle and brought the Steam
Horse to a halt.
“Where is my long distance glass?” he asked Barney.
The Celt produced it quickly.
Frank brought it to bear upon the distant rider.
For a moment he scrutinized him closely. Barney and Pomp were
eagerly waiting the decision.
“Shure, an’ phwat do yez make av him, Misther Frank?” asked
Barney.
“Well, he is a strange-looking character,” replied Frank, “but he is
certainly a white man.”
“Golly! dat am joyful news!” cried Pomp. “It will seem jes’ glad fo’
to see a white man once moh.”
“Or a black man, either!” grinned Barney.
Pomp did not notice this insinuation but continued:
“P’raps it am dat bery chap youse lookin’ fo’, Marse Frank.”
“We’ll soon find out!” declared the young inventor, calmly.
Frank opened the throttle and started the Steam Horse ahead.
The distant rider evidently had not seen the Steam Horse, for he
had been riding with his head bowed down.
When he did lift his gaze and saw the strange invention coming
toward him, the effect was surprising.
He pulled his pony up short and sat for a moment in the saddle
like a veritable statue.
Then he seemed imbued with an impulse to flee.
But Frank saw this in time and brought the Horse to a stop.
The young inventor alighted from the wagon and waved his arms
in a reassuring manner.
The traveler, who was a man of singular garb and appearance,
remained and answered the signal.
Frank boldly advanced on foot toward this singular nomad of the
plains, for such the rider appeared to be.
He was a tall, powerful-framed, coarse-featured man of forty-five
years of age.
His hair hung in long, matted folds down upon his back from
beneath a clumsy bearskin cap.
A tremendous patriarchal-like beard covered his chest; keen black
eyes looked out from shaggy brows. Such was his face and form.
His garb was of a nondescript kind, and wholly the product of
trapper life.
Greasy buckskin leggings and moccasins inclosed legs and feet, a
red shirt, dirty and patched, was worn beneath an outer jacket of
tanned deer hide, fringed with porcupine quills.
The unknown carried a rifle and revolvers and knife, and rode in
an Indian saddle, with a curious bridle of plaited rawhide to decorate
the pony with.
Such types were rarely met with in that part of the West, and
Frank knew it.
This man, he instantly reflected, was far from his usual haunts.
He was a trapper from the wilds of Montana, and made his living in
dealing in traps and furs.
What he was doing in this part of the world was a problem.
However, Frank advanced boldly toward him.
When within safe speaking distance, the young inventor asked:
“Good-day to you, stranger. Where are you traveling?”
CHAPTER V.
BEAVER BILL’S INFORMATION.