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1.Discuss minimum of two (2) Ordinary least square (OLS) assumptions and their importance for a validity of regression model 1.The Head of production at Amiba

1.Discuss minimum of two (2) Ordinary least square (OLS) assumptions and their importance for a validity of regression model

1.The Head of production at Amiba private limited needed to examine the key determinants of company profitability($,000). So, he collected relevant(monthly) data and following is the summary of his regression output.

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.5776
R Square 0.3336
Adjusted R Square 0.2670
Standard Error 2.2743
Observations 34

ANOVA
df SS MS F Significance F
Regression 3 77.6774 25.8925 5.0060 0.0062
Residual 30 155.1693 5.1723
Total 33 232.8467

Coefficients Standard Error t Stat P-value

Lower

95%

Upper

95%

Lower

95.0%

Upper

95.0%

Intercept 10.49 2.9211 3.5927 0.0012 4.5291 16.4605 4.5291 16.4605
Variable X 0.99 1.2461 0.7937 0.4336 -1.5559 3.5340 -1.5559 3.5340
Variable Y 2.56 1.1291 2.2663 0.0308 0.2529 4.8648 0.2529 4.8648
Variable Z 2.06 1.2777 1.6107 0.1177 -0.5515 4.6674 -0.5515 4.6674

  1. Interpret the meaning of intercept coefficients and at 5% level review the significance of those variables to the model
  2. Calculate the adjusted R square and interpret its meaning
  3. Based on your opinion, decide the names of the explanatory variables used in the study. (Note: variable selection should have a valid justification)

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