Fuel efficiency
Both drivers and auto companies are motivated to raise the fuel efficiency of cars. Recent information posted by the U.S. government proposes some simple ways to increase fuel efficiency (see www.fueleconomy.gov): avoid rapid acceleration, avoid driving over 60 mph, reduce idling, and reduce the vehicle’s weight. An extra 100 pounds can reduce fuel efficiency (mpg) by up to 2%. A marketing executive is studying the relationship between the fuel efficiency of cars (as measured in miles per gallon) and their weight to design a new compact car campaign. In the file Fuel Efficiency you’ll find data on the variables below.15
• Model of Car
• Engine Size
• Cylinders
• MSRP (Manufacturer’s Suggested Retail Price in $)
• City (mpg)
• Highway (mpg)
• Carbon footprint
• Transmission type (Automatic or Manual)
• Fuel type (Regular or premium)
Describe the relationship of MSRP and Engine Size with Fuel Efficiency (both City and Highway) in a written report. Only in the U.S. is fuel efficiency measured in miles per gallon. The rest of the world uses liters per 100 kilometers. To convert mpg to l>100 km, compute 235.215>mpg. Try that form of the variable and compare the resulting models. Be sure to plot the residuals.
Cost of Living
The Numbeo website (www.numbeo.com) provides access to a variety of data. One table lists prices of certain items in selected cities around the world. They also report an overall cost-of-living index for each city compared to the costs of hundreds of items in New York City. For example, London at 110.69 us 10.69% more expensive than New York. You’ll find the data for 322 cities as of March 23, 2013 in the file Cost of living 2013. Included are the Cost of Living Index, a Rent Index, a Groceries Index, a Restaurant price Index, and a Local Purchasing Power Index that measures the ability of the average wage earner in a city to buy goods and services. All indices are measured relative to New York City, which is scored 100.Examine the relationship between the Cost of Living Index and the Cost Index for each of these individual items. Verify the necessary conditions and describe the relationship in as much detail as possible. (Remember to look at direction, form, and strength.) Identify any unusual observations.
Based on the correlations and linear regressions, which item would be the best predictor of overall cost in these cities? Which would be the worst? Are there any surprising relationships? Write a short report detailing your conclusions.
Mutual Funds
According to the U.S. Securities and Exchange Commission (SEC), a mutual fund is a professionally-managed collection of investments for a group of investors in stocks, bonds, and other securities. The fund manager manages the investment portfolio and tracks the wins and losses. Eventually the dividends are passed along to the individual investors in the mutual fund. The first group fund was founded in 1924, but the spread of these types of funds was slowed by the stock market crash in 1929. Congress passed the Securities Act in 1933 and the Securities Exchange Act in 1934 to require that investors be provided disclosures about the fund, the securities, and the fund manager. The SEC drafted the Investment Company Act, which provided guidelines for registering all funds with the SEC. By the end of the 1960s, funds reported $48 billion in assets and, by October 2007 there were over 8,000 mutual funds with combined assets under management of over $12 trillion. Investors often choose mutual funds on the basis of past performance, and many brokers, mutual fund companies, and other websites offer such data. In the file Mutual fund returns 2013, you’ll find the 3-month return, the annualized 1 yr, 5 yr, and 10 yr returns, and the return since inception of 64 funds of various types. Which data from the past provides the best predictions of the recent 3 months? Examine the scatterplots and regression models for predicting 3-month returns and write a short report containing your conclusions.