A regression analysis was done of residential property values in a portion of a

Question

A regression analysis was done of residential property values in a portion of a city. The dependent variable is Sale Price (Y) and the independent variable is Square Footage (X). Data for 157 properties were used in the regression. The results are listed below. Predicted Y = 96,600 + 22.5(X) R-square = .77 Interpret the value of R-square Incorrect

B. 77% of the observed sale process will fall within two standard deviations from the least squares line.

C. There is a moderately strong negative correlation between Sale Price and Square Footage.

D. 77% of the variability in Sale Price can be explained by knowing the Square Footage.

Explanation / Answer

The definition of R-squared is fairly straight-forward; it is the percentage of the response variable variation that is explained by a linear model.

Or

R-squared = Explained variation / Total variation

Hence answer is

D. 77% of the variability in Sale Price can be explained by knowing the Square Footage.

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