Explain. In exercise 5, the owner of Showtime Movie Theaters, Inc., used multipl

Question

Explain. In exercise 5, the owner of Showtime Movie Theaters, Inc., used multiple regression anal- ysis to predict gross revenue (y as a function of television advertising (x) and newspaper advertising (2). The estimated regression equation was 15. y = 83.2 + 2.29x, + 1.30x2 The computer solution provided SST 25.5 and SSR = 23.435. a. Compute and interpret R2 and R3. b. When television advertising was the only independent variable, R2=.653 and Ri = .595. Do you prefer the multiple regression results? Explain.

Explanation / Answer

sOLUTIONA:

R sq=SSR/SST

=23.435/25.5

=0.9190196

91.90% varaitaion in gross revenue is explained by model.

To calculate Adj R sq n ios needed

as Ad j Rsq= 1-SSE(n-k-1)/SST(n-1)

no of observation needed

k=2

Good model.

Solution15 b

for Multiple regression results RSq and Ad j R sq are high (91% variation in y is epxlained by model .good model)

and linear regression results RSq and Ad j R sq are less

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