This is a problem in model selection. A big box home improvement store has collected data on

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This is a problem in model selection. A "big box" home improvement store has collected data on its sales and demographic variables relating to its various stores. The cross-sectional data set for these variables is below:
Sales X1 X2 X3 X4 X5 2,387 3,003 3,079 281 878 6,575 6,236 5,665 5,255 5,956 5,976 7,028 7,162 5,201 6,563 5,540 6,936 5

where:

Sales = average monthly store sales (in thousands of dollars) XI = Households in a 5-mile ring that are do-it-youselfers (in thousands) X2 = Average monthly advertising expenditures (in dollars) X3 = Square footage of competitor stores in a 5-mile ring (in thousands) X4 = Households in a 5-mile ring that are below the poverty level (in hundreds] X5 = Weighted average daily traffic count at store intersection

a. Begin by estimating a model with independent variables XI, X2, and X3. Comment on the appropriateness of this model and its accuracy.

b. Now add X4 to the model above and again comment on the appropriateness of the model. Has the accuracy improved?

c. Finally, add X5 to the model and again comment on the accuracy of the model. Use the appropriate summary statistics of the three models to suggest which of the five independent variables should be in the model. Advise the "big box" retailer on which characteristics are important when choosing new store locations.

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Related Book For  book-img-for-question

Business Forecasting With Forecast X

ISBN: 647

6th Edition

Authors: Holton Wilson, Barry Keating, John Solutions Inc

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