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A random sample consisting of 200 business executives working in the Downtown area is drawn and they were asked to answer a set of questions.
A random sample consisting of 200 business executives working in the Downtown area is drawn and they were asked to answer a set of questions. One question in the survey asked about their annual salary and another about their annual expenses on luxury goods. We regress the spending on salary, and the regression has R2 = 0.884.
a. Interpret the result of the R2 value in this context.
b. "Despite the high value of R2, a linear regression model may not be appropriate."Comment.
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