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    316-206 Quantitative Methods 2: Part A

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    Clifton Lo
    This document provides instructions and questions for a quantitative methods tutorial. It includes two questions for students to complete: 1) Estimating the relationship between business expenses and number of cars washed using regression analysis. 2) Using a bank data set to examine whether years of work experience is related to job performance quality ratings through hypothesis testing. It also provides supplemental materials and instructions for using statistical software to complete exercises on additional tutorial questions.

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    316-206 Quantitative Methods 2: Part A

    Uploaded by

    Clifton Lo
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    This document provides instructions and questions for a quantitative methods tutorial. It includes two questions for students to complete: 1) Estimating the relationship between business expenses and number of cars washed using regression analysis. 2) Using a bank data set to examine whether years of work experience is related to job performance quality ratings through hypothesis testing. It also provides supplemental materials and instructions for using statistical software to complete exercises on additional tutorial questions.

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    This document provides instructions and questions for a quantitative methods tutorial. It includes two questions for students to complete: 1) Estimating the relationship between business expenses and number of cars washed using regression analysis. 2) Using a bank data set to examine whether years of work experience is related to job performance quality ratings through hypothesis testing. It also provides supplemental materials and instructions for using statistical software to complete exercises on additional tutorial questions.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    56 views3 pages

    316-206 Quantitative Methods 2: Part A

    Uploaded by

    Clifton Lo
    This document provides instructions and questions for a quantitative methods tutorial. It includes two questions for students to complete: 1) Estimating the relationship between business expenses and number of cars washed using regression analysis. 2) Using a bank data set to examine whether years of work experience is related to job performance quality ratings through hypothesis testing. It also provides supplemental materials and instructions for using statistical software to complete exercises on additional tutorial questions.

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    Attribution Non-Commercial (BY-NC)
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    316-206 Quantitative Methods 2

    First Semester, 2008

    Tutorial 5
    for week of April 14 to April 18, 2008

    PART A Questions to be completed BEFORE the tutorial

    Question A1
    The owner of a business providing hand car washes wished to estimate the relationship
    between total expenses each day (labeled y and measured in $000s) and the number of
    cars washed each day (x). These expenses include: wages, rent, water costs, electricity,
    chemicals, materials, etcetera. A random sample of 35 days was chosen, and on each of
    these days expenses y and number of cars washed x were recorded. With this sample, the
    following statistics were calculated.
    n
    X n
    X n
    X n
    X n
    X
    xi = 2, 549 yi = 31.4 xi yi = 2, 659 x2i = 233, 680 yi2 = 28.7
    i=1 i=1 i=1 i=1 i=1

    Using this information, complete the following.

    a Find the ordinary least squares regression line, i.e. calculate βb0 and βb1 .

    b Interpret the values of βb0 and βb1 that you have calculated.

    c Show that your regression line passes through the mean of the sample, i.e. show that
    y = βb0 + βb1 x.

    Question A2
    The branch manager of a bank wants to know whether a teller’s experience is related
    to the quality of his or her work. The manager selects 15 tellers at random and records
    their years of work experience and their quality rating (as assessed by their supervisors).
    The quality rating scheme is as follows: 5 = excellent, 4 = very good, 3 = average, 2 = fair,
    and 1 = poor. The information for the 15 tellers is printed below.
    Can we infer from these data that years of work experience is related to the quality of
    work performed? Use α = .10. Please do your calculations in Excel or by hand, not in
    EViews. One of the main objectives of this question is to understand how the appropriate
    statistic is constructed.

    1
    Teller Experience Rating Teller Experience Rating
    1 1 1 9 7 5
    2 1 2 10 8 3
    3 2 2 11 8 4
    4 4 4 12 9 3
    5 5 3 13 10 2
    6 5 5 14 15 4
    7 6 3 15 20 5
    8 6 4

    PART B Exercises to be completed during the tutorial, but you are free to try
    them yourself beforehand if you wish.

    Question B1
    This exercise uses the data in file XR21-75.xls that comes with Edition 4 of the Sel-
    vanathan et al textbook on the CD-rom (XR18-75.xls of the third edition). You can also
    download this file from the LMS, in the “Data for Tutorials” folder under the “Tutorials”
    section for this subject.

    Background:
    One general belief held by observers of the business world is that taller men earn more
    money than shorter men. In a study reported in the Wall Street Journal, 30 MBA graduates,
    all about 30 years old, were surveyed and asked to report their annual incomes (in $US)
    and their heights (in centimetres). This information is recorded in the Excel file, with
    “height” in the first column and “income” in the second column.
    Here are the tasks to complete:

    a In EViews, plot the data of “income” and “height” in a scatter plot. Does the relationship
    between the two variables look positive or not?

    b In EViews, calculate the sample regression line, where your dependent variable y is
    income, and the independent or explanatory variable x is height.

    c Interpret the estimated coefficients from the regression.

    d Do these data provide sufficient statistical evidence to infer at the 5% significance level
    that taller MBAs earn more money than shorter ones? Assume that the required
    conditions for using OLS hold.

    e Construct simple descriptive statistics for the two variables (height and income) and
    note the sample means for each variable.

    2
    f Show yourself that the estimated regression line passes through these sample means, i.e.
    y = βb0 + βb1 x.

    g The residuals from your estimated regression have been placed by EViews automati-
    cally in the data series entitled “resid” in the workfile. Construct simple descriptive
    statistics for this series of regression residuals to show yourself that the mean of the
    residuals (and thus also their sum) equals zero (or incredibly close to it).

    Some tips for doing these tasks in EViews:

    1. To construct a scatter plot, do the following after loading in your data. In the workfile
    window, select your x variable “height”, then while holding down the “Ctrl” key,
    select your y variable “income”. The two variables should be highlighted. Then
    right click your mouse and a pop-up box should appear. Choose “Open” then “as
    group”. The two variables should appear in spreadsheet view. Click on “View” in
    this window, then “Graph”, then “Scatter” then “Simple scatter”. Your scatter should
    appear with height on the horizontal axis and income on the vertical axis, like we
    want.

    2. To calculate a regression in EViews, do the following. In the workfile window, select


    your y variable, then while holding down the “Ctrl” key, select your x variable. The
    two variables should be highlighted. Then right click your mouse and a pop-up
    box should appear. Choose “Open” then “As equation...”. A box should appear
    denoted “Equation specification”. It should read “income height c”. This denotes
    that you are running a regression of the equation with “income” on the left hand
    side (y variable) and “height” plus a constant “c” on the right hand side. EViews
    automatically includes a constant “c”. This variable “c” will have the intercept term
    βb0 estimated as its coefficient. If “income” (your y variable) is not the first variable
    in the equation list, change the equation so it is. Below this box is another entitled
    “Estimation settings”. Under “Method” it should read “LS - Least Squares (NLS
    and ARMA)”. This denotes that EViews is going to estimate the equation using
    ordinary least squares, which is what we want to do here.

    3. To calculate simple summary statistics for your variables, select your variables and
    open them as a group. Click on “View” then “Descriptive Stats” then “Common
    Sample”. A whole array of summary statistics should appear, the same ones that
    appear if you had constructed “Histogram and stats” for each variable separately
    like in previous tutorials.

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