Question 1

• For each data set in Assignment4_linear_regression_data.xlsx:
• Create a scatter plot and visually decide if a linear model is appropriate (a matrix scatter plot will would be most efficient).
• If the relation is not linear, transform the data accordingly.
• Try logarithm, exponential, square root, square, etc., for Y and/or X until you see a linear relation. You only need to report what is the transformation chosen, not all the attempts. Note: most of the time, you can guess visually. A systematic way is to create a matrix scatter plot of the different transformations. A generic way we did not cover is to use a Box-Cox transformation.
• Create an OLS model for the original and transformed data if required.

Evaluate if the OLS assumptions are met: normality of errors centered around zero, equal variance, etc..., for the original data and transformed data if appropriate.

Comment how the transformation impacted the different assumptions. (This should be done only by looking at the output diagnostic charts created by the software)

If datasets have outliers, remove the outliers and see the effect in the model (slope, intercept and R-square)

The output of the assignment should be:

OLS full report for the original and transformed data if appropriate (only two datasets should need transformation).

A short comment on the validity of the linear assumptions for the original and transformed data set when appropriate (it should not need to be longer than a couple of sentences).

An interpretation of the slope and intercept in relation to the original data, i.e. if the model is linear [intercept value] is the expected value when the independent variable is zero, etc.). If the model is not linear, you need to transform the equation back to its original form.

Check out the following if you need further guidance: http://www.bzst.com/2009/09/interpreting-log-transformed-variables.html

https://stats.idre.ucla.edu/other/mult-pkg/faq/general/faqhow-do-i-interpret-a-regression-model-when-some-variables-are-log-transformed/

https://stats.idre.ucla.edu/sas/faq/how-can-i-interpret-log-transformed-variables-in-terms-of-percent-change-in-linear-regression/

https://stats.stackexchange.com/questions/266722/interpretation-of-linear-regression-results-where-dependent-variable-is-transfor

• If the dataset have outliers, determine if the outlier have leverage or not by comparing the OLS with and without the outlier.