Unlocking the Power of Linear Regression Analysis in Predictive Analytics

Problem Description:

This linear regression assignment involves conducting a thorough analysis of a regression model to predict the logarithm of house sale prices based on various independent variables. The goal is to assess the model's assumptions, identify significant predictors, and provide meaningful interpretations.

Analysis Overview:

1. Normality and Linearity Assumptions:

• Histogram of Standardized Residuals: Indicates approximately normal distribution with minor deviations.
• Normal P-P plot: Confirms linearity assumption without significant violations.

2. Heteroscedasticity Check:

• Plot of ZPRED and ZRESID: Suggests no heteroscedasticity issue.
• Possible remedies for heteroscedasticity are discussed.

3. Model Coefficients:

• Coefficient summary with unstandardized and standardized coefficients, t-values, and significance levels.

Coefficient

Figure 1: A summary of the coefficients

4. Significant Independent Variables:

• Identified at different significance levels (1%, 5%, 10%).
• Interpretations provided for selected variables.

5. Durbin-Watson Statistic:

• DW statistic of 1.091 indicates positive autocorrelation, discussed further.

Significant Predictors:

a) IVs at 1% (1%) level:

• List of variables significant at a 1% significance level.

b) IVs at 5% (5%) level:

• List of variables significant at a 5% significance level.

c) IVs at 10% (10%) level:

• List of variables significant at a 10% significance level.

Interpretations:

d) Selected Interpretations:

• Interpretations for size of the house, quality, and lake view.

Durbin-Watson Statistic:

e) Autocorrelation Check:

• Explanation of the DW statistic indicating positive autocorrelation.

Part 2: LIMDEP Model Summary:

Figure 2: LIMDEP Model Summary

a) R-square and Adjusted R-square:

• R-square: 0.7365
• Adjusted R-square: 0.7352

b) Comparison with SPSS Model:

• Slight difference in adjusted R-square values.

Significant Predictors in LIMDEP Model:

d) IVs at 1%, 5%, and 10% levels:

• Significant variables at different significance levels.

Additional Interpretations:

g) Effect of House Size, Quality, and Lake View:

• Interpretations for size, quality, and lake view variables.

Conclusion:

The analysis provides insights into the regression model, its assumptions, and significant predictors. Interpretations aid in understanding the impact of variables on house prices. Autocorrelation is detected and discussed. Comparison with the SPSS model reveals slight variations in adjusted R-square values.