You are a sales manager for a large pharmaceutical company and are interested in examining the relationship between sales and the work experience of your sales force. To examine that relationship you obtain data on the characteristics of 200 of your sales representatives located throughout the United States. Using that data, you specify the following simple linear regression model: Sales, = B, + B,Exp, +6,. (1.1) Where Sales, denotes the total sales (in thousands of dollars) of individual iand Expdenotes the sales experience of individual i (measured in years). Results based on the estimation of the model above are reported below with standard errors in parentheses. Sales, = 60 +1.2E×P, (20) (0.05) Observations = 200 Unexplained Sum of Squares = 6,000 Total Sum of Squares = 8,000 2.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
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2e. Calculate the Rsq of the regression and interpret the Rsq.
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