In Simple Regression Analysis, the model consists of one dependent variable, and

Question

In Simple Regression Analysis, the model consists of one dependent variable, and one independent variable.

Multiple Regression Analysis models use one dependent variable, but use two or more independent variables that the researcher believes have explanatory power to predict the value of the dependent variable.

Using a company/industry of your interest:

Define a key performance indicator (for example, annual unit sales) that would serve as the dependent variable that you would like to predict. Give this variable a name that is eight characters or less in length, as you would use it in a statistical software package.

Define two or more independent variables (also known as explanatory variables) that you believe would have predictive power to use in a multiple regression model to predict the value of the dependent variable. Give these variables names that are eight characters or less in length, as you would use it in a statistical software package.

For each independent variable, (a) define what type of variable it is (quantitative or qualitative) and (b) how it would be measured. Remember, any qualitative variable should be dichotomous (meaning the attribute is either present or it is not) and you should indicate the anchor descriptions for the 0 or 1 values).

Describe any potential challenges you think could be present in the design of your model.

Please comment on the models presented by other learners to identify strengths and potential challenges of their designs.

For example:

Dependent Variable: ASP. Average Product Sales Price is used in the Timeshare Industry as a key performance indicator, and it is measured on a ratio scale.

Independent Variable 1: INCOME. The annual income of the sales prospect. This is quantitative variable measured on a ratio scale.

Independent Variable 2: CHILDREN. An indicator that the sales prospect has children. This is a qualitative variable where: 0 = No Children, and 1 = Has Children.

One challenge in the design of the model is the use of a qualitative variable to indicate if the sales prospect has children; this variable may be changed to a quantitative variable to indicate the number of children as an alternative.

Explanation / Answer

Let us consider an example - Is a baby's birth weight related to the mother's smoking during pregnancy?

Dependent Variable: birth weight (Weight) of baby. This is quantitative variable measured in grams.

Independent variable 1 (x1): Smoking status of mother (yes or no). This is a qualitative variable where: 0 = No Smoking, and 1 = Smoking.

Independent variable 2 (x2): length of gestation (Gest) . This is quantitative variable measured in weeks.

One challenge in the design of the model is the use of a qualitative variable to indicate if the smoking status of mother is yes; this variable may be changed to a quantitative variable to indicate the number of cigarettes smoked per day.

Another challenge in the design of the model is absence of other variables which may affect the dependent variable (birth weight). Other variables which can be included in the model, mother's physical condition status, medications taken by mother.

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