Regression Diagnostics and Pitfalls The scatterplot below shows fabricated data

Question

Regression Diagnostics and Pitfalls The scatterplot below shows fabricated data for the price per share versus earnings per share per year of 100 public corporations. The average earnings per share is $9.75 per year with an SD of $5.98 per year, and the average price per share is $69.23 with an SD of $34.81. The correlation between price and eamings is 0.905. (Use this figure in your calculations, not the value of the correlation coefficient in the applet.) Faux Price per share vs. Earnings Data 140 100 90 60 40 20- 10 12 14 16 18 r: 0.91 Regression Line Plot Residuals x = 8.45 y 4.69 Problem 10 the rms of The correlation coefficient of two variables is 0.1. The ms of the residuals from the SD line (Q15) 2 the residuals from the regression line A: is loss than B: could be less than, equal to, or greater than C: is greater than

Explanation / Answer

The RMS of the residuals from the SD deviation line could be greater than or less than or equal to rms of residuals from regression line because the points are randomly distributed and there is not fixed pattern.

RMS is difference of actual point from the REgression/Standard deviation line.

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