Suppose your roommate is a bright student, but she has studied no economics, and

Question

Suppose your roommate is a bright student, but she has studied no economics, and little statistics. (Specifically, she understands only simple-but not multiple- regression). In trying to explain what influences U.S price level, she has regressed U.S. prices on 100 different economic variables, one at a time (i.e., in 100 simple regressions). Also, she apparently selected these variables in a completely haphazard way without any idea of potential cause-and-effect relations. She discovered five variables that were statistically significant at the 5% significance level and concluded each of these had an influence on U.S. prices. Carefully Explain to her in simple terms what reservations if any you have about her conclusion. middotThe directors of marketing at Vanguard Corporation believes that sales of the company's Bright Side laundry detergent are related to Vanguards own advertising expenditure as well as the combined advertising expenditures of its three biggest rival detergents. The marketing director collects 36 weekly observations on these variables to estimate the following regression: Coefficient P Value Intercept 175086.0 0.0098 Advertising 0.8550 0.0128 Rivals Advertising -0.284 0.0927 R^2 = 0.2247 F = 4.781 P Value on F 0.0150 Fully Evaluate and Interpret these empirical results on the basis of all available statistics (use a 0.05 significance level).

Explanation / Answer

If the p-value of any coffcient is less than level of significane , it means

the independent variable is significant

here level of significane is 0.05 .

hence advertising and intercept is significant , whereas rivals advertising is not

Overall model has p-value on F = 0.0150 < 0.05

hence the model is significant

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