Regression Lecture 3.docx

# Regression Lecture 3.docx - EC 370 Lecture 3 Regression...

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EC 370 Lecture 3 Regression Making a prediction o Half-time score: Spartans 9, Wolverines 0 o What is the best prediction of the final point differential? If the second half is a mirror image of the first, then predict 14 Buy maybe the team that is ahead was relatively lucky or will play more conservatively. Then predict less than 14 But maybe the team that is behind will give up. Then predict more than 14. o Or, Use Statistics o Gather data o Plot the data o Fit the line o Interpret the Coefficients o Test the Hypothesis o Use the estimates to predict Example Big ten football games: October, 2011 Vertical axis: final point differential Horizontal axis: 2 x first half point differential Fit the line Slope = 1 implies that twice the first half is the best predictor of the final Slope < 1 implies regression to the mean Regression Line Independent variable: first half (2 x first half point differential) Dependent variable: final (final point differential)

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