Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. Use the data frame BigMac2003 in alr4, which contains the response BigMac, or the price of a Big Mac in various world cities in

3. Use the data frame BigMac2003 in alr4, which contains the response BigMac, or the price of a Big Mac in various world cities in 2003, expressed in minutes of labor. It also contains quantitative predictors Bread, Rice, Bus, and Apt, which are prices of other goods, as well as economic indicators FoodIndex, TeachGI, TeachNI, TaxRate, and TeachHours.

a. Use principal components analysis on the nine predictors. Report your scree plot and a biplot.

b. How many principal components are necessary to use in order to account for at least 90% of the variance in the predictors?

c. Fit the MLR model with the response BigMac and the first four principal components as regressors. Then fit the model that contains all nine original predictors. Compare the coefficients of determination for the two models. Are you satisfied that the model with fewer regressors fits sufficiently well compared to the full model?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance for Non Financial Managers

Authors: Pierre Bergeron

7th edition

176530835, 978-0176530839

More Books

Students also viewed these Finance questions

Question

What effect does a high credit risk have on securities?

Answered: 1 week ago

Question

=+b. How many workers were unemployed for 27 or more weeks?

Answered: 1 week ago