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Lecture9-2-1

# Lecture9-2-1 - So far we have done statistics on one...

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So far we have done statistics on one variable at a time (estimation and testing). We are now interested in relationship between two variables and how to use one variable to predict another variable. E.g., the advertising and sale: ( Description ) How sale depends on advertising expenditure? ( Control ) How much to spend on advertising to reach certain goal on sale? ( Prediction ) How much sale do we expect if we spend certain amount of money on advertising? 2
3 Use scatterplots to look at the relationship between two quantitative variables (measured on the same individuals) (First step when studying the relationship) The values of one variable --> horizontal axis The values of the other variable --> vertical axis Each individual appears as a point in the plot Explanatory variable (if there is one) --> horizontal axis, Response --> vertical axis

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4 Look at the Federal funds interest rate and the national unemployment rate – every 6 months from 2000 to 2006 (Source: U.S. Federal Reserve and the U.S. Department of Labor) Interest Unemploy- Date rate ment rate Jan. 2000 5.45% 4.0% July 2000 6.54% 4.0% . . . . . . . . . Jan. 2006 4.29% 4.7% July 2006 5.24% 4.8%
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6 Two variables measured on the same individuals are called positively associated if increasing values of one variable tend to occur with increasing values of the other They are negatively associated if increasing values of one variable occur with decreasing values of the other Examples: Per capita GDP of countries is positively associated with life expectancy Federal funds interest rate is negatively associated with the unemployment rate
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Lecture9-2-1 - So far we have done statistics on one...

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