14_Building_Regression_Models_Part1 - BUILDING REGRESSION MODELS PART 1 Topics Outline Partial F Test Adjusted r 2 C p Statistic Include\/Exclude

14_Building_Regression_Models_Part1 - BUILDING REGRESSION...

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- 1 - BUILDING REGRESSION MODELS – PART 1 Topics Outline Partial F Test Adjusted 2 r p C Statistic Include/Exclude Decisions Variable Selection ProceduresPartial FTest There are many situations where a set of explanatory variables form a logical group. It is then common to include all of the variables in the equation or exclude all of them. An example of this is when one of the explanatory variables is categorical with more than two categories. In this case you model it by including dummy variables – one fewer than the number of categories. If you decide that the categorical variable is worth including, you might want to keep all of the dummies. Otherwise, you might decide to exclude all of them. Consider the following general situation. Suppose you have already estimated a reducedmultiple regression model that includes the variables 1xthrough jxεββα+++=jjxxyL11Now you are proposing to estimate a larger, referred to as full, model that includes +jxthrough kxin addition to the variables 1xthroughjx: εββββα+++++=++kkjjjjxxxxyLL1111 : 1 : .)
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