Name of the Student
19th December 2015
Linear Regression is a statistical inference, from where the cause and effect relationship between two variables are assessed. It helps to predict the magnitude of one variable from the magnitude of another variable. The former variable is called criterion and the later variable is called criterion. In this article the price of real estate was estimated from the wise year prices.
Sales data was considered from the hyperlink: https://netfiles.umn.edu/users/nacht001/www/nachtsheim/Kutner/Appendix%20C%20Data%20Sets/APPENC11.txt
Data was randomly selected and aligned to R software package. The dependent variable (criterion) was real estate price (price) while the independent variable was assessment year (year).
Null hypothesis contends that there is no significant relation between the two variables and one variable cannot be extrapolated to find out the value of other variable (p>0.05). On the other hand, the alternate hypothesis contends that there is significant relation between the two variables and one variable can be extrapolated to find out the value of other variable (p<0.05). Further, the relationship between the two variables may be positive or negative. This means the value of one variable may increase the value of another variable (positive correlation) or increasing the value of one variable may decrease the value of another variable (negative correlation).
Linear Regression – Estimated Regression Equation
price = +14.27032967033 year +131.04395604396
Multiple Linear Regression – Ordinary Least SquaresVariable Parameter S.E. T-STATH0: parameter = 0 2-tail p-value 1-tail p-value
ye[t] 14.27033 0.762756 18.708915 0 0
Constant 131.043956 6.49463 20.177279 0 0
Variable Partial Correlation
Critical Values (alpha = 5%)
1-tail CV at 5% 1.79
2-tail CV at 5% 2.18
Adjusted R-squared 0.964091
Degrees of Freedom 12
Linear Regression – Analysis of Variance
ANOVA DF Sum of Squares Mean Square
Regression 1 46328.625275 46328.625275
Residual 12 1588.303297 132.358608
Total 13 47916.928571 3685.9175824176
Discussion & Conclusion
The above results clearly indicates that indeed real estate price and assessment year is positively correlated (p<0.05) and the regression equation is significant too (p<0.05). So, assessment year may successfully predict the price of real estate. The equation is quite robust as the R value (coefficient of determination) is nearly 97%. Moreover, the trend is linear with very few outliers.