Guide to Using Excel For Basic Statistical Applications

Guide to Using Excel For Basic Statistical Applications

To Accompany

Business Statistics: A Decision Making Approach, 6th Ed.

Chapter 13:

Introduction to Linear Regression and Correlation Analysis

By

Groebner, Shannon, Fry, & SmithPrentice-Hall Publishing Company

Copyright, 2005

Chapter 13 Excel Examples

Correlation CoefficientMidwest Distribution

Regression AnalysisMidwest Distribution

• Regression AnalysisFitzpatrick and Associates

Regression Analysis for Description Car Mileage

Chapter 13 Excel Examples

Regression Analysis for Prediction

Freedom HospitalResidual Analysis

Freedom Hospital

Correlation Analysis - Midwest Distribution

Issue:

The company wants to analyze the relationship between salary and years with the company.

Objective:

Use Excel to help test whether a significant relations exists between salary and years with the company. Data file is Midwest.xls

Open File Midwest.xls

To construct the scatter diagram see the Personal Computers tutorial in Chapter 2.

Correlation Analysis – Midwest Distribution.

First click on Tools, then Data Analysis and finally on Correlation.

Correlation Analysis – Midwest Distribution.

Define ranges for Variables. Click on O.K.

Correlation Analysis – Midwest Distribution.

The Excel output shows the correlation between Sales and Years with Midwest.

Correlation Analysis – Midwest Distribution.

Regression Analysis - Midwest DistributionRegression Analysis - Midwest Distribution

Issue:

The marketing manager wants to determine the relationship between sales and years with the company.

Objective:

Use Excel to test whether the apparent linear relationship is statistically significant. Data file is Midwest.xls

Open File Midwest.xls

Regression Analysis – Midwest Distribution

Click on Tools, then Data Analysis and finally Regression

Regression Analysis – Midwest Distribution

Identify Data ranges for the X and Y variables. Click on O.K.

Regression Analysis – Midwest Distribution

The output shows the correlation coefficient and the coefficients for the regression equation.

Regression Analysis – Midwest Distribution

SSE=SSR + SSE F= MSR/MSE

MS= Mean Squares

Regression Analysis - Fitzpatrick & AssociatesRegression Analysis - Fitzpatrick & Associates

Issue:

The Fitzpatrick analysts want to model the relationship between profits and number of employees.

Objective:

Use Excel to test whether the apparent linear relationship is statistically significant. Data file is Fortune 50.xls

Open File Fortune 50.xls

Regression Analysis – Fitzpatrick & Associates

Click on Chart Wizard button, then XY Scatter

Regression Analysis – Fitzpatrick & Associates

Define Data ranges in chart wizard. Note: Excel requires the data to be in adjacent columns with the X variable on the left.

Regression Analysis – Fitzpatrick & Associates

Finish steps in Chart Wizard.

Regression Analysis – Fitzpatrick & Associates

To find regression model, return to Data sheet.

Regression Analysis – Fitzpatrick & Associates

Click on Tools, then Data Analysis and finally Regression

Regression Analysis – Fitzpatrick & Associates

Identify Data ranges for the X and Y variables. Click on O.K.

Regression Analysis – Fitzpatrick & Associates

The output shows the correlation coefficient and the coefficients for the regression equation.

Regression Analysis – Fitzpatrick & Associates

Regression Analysis - Car MileageRegression Analysis - Car Mileage

Issue:

Analysts want to determine the relationship between EPA highway mileage and automobile horsepower.

Objective:

Use Excel to test whether the apparent linear relationship is statistically significant. Data file is Automobiles.xls

Open File Automobiles.xls

Regression Analysis – Car Mileage

Click on Tools, then Data Analysis and finally Regression

Regression Analysis – Car Mileage

Identify Data ranges for the X and Y variables. Click on O.K.

Regression Analysis – Car Mileage

The output shows the correlation coefficient and the coefficients for the regression equation.

Regression Analysis – Car mileage

Regression Analysis for Prediction - Freedom HospitalRegression Analysis for Prediction - Freedom Hospital

Issue:

The administrator has been requested by the hospital’s board of directors to develop a model that can be used to predict the total charges for a geriatric patient.

Objective:

Use Excel to develop a statistically significant prediction model. Data file is Patients.xls

Open File Patients.xls

File contains values for 138 patients.

Regression Analysis for Prediction – Freedom Hospital

To develop the model first click on Tools, then Data Analysis and finally on Regression.

Regression Analysis for Prediction – Freedom Hospital

Define range for Variables and select the Alpha value (.05). Click on O.K.

Regression Analysis for Prediction – Freedom Hospital

The Excel output shows both the correlation coefficient and the coefficients of the linear regression model.

Regression Analysis for Prediction – Freedom Hospital

To determine prediction interval, return to data sheet, click on PHStat, then Regression and finally Simple Linear Regression.

Regression Analysis for Prediction – Freedom Hospital

Specify the Cell Range for the X and Y variables. Then click the Confidence Interval box and specify the value for X and the Confidence Level.

Regression Analysis for Prediction – Freedom Hospital

The output shows the 95% confidence interval for both the Average Value of Y and for an Individual Value of Y.

Regression Analysis for Prediction – Freedom Hospital

Issue:

The administrators want to determine whether the prediction model developed is a valid use of regression analysis or whether it violates some of the necessary assumptions. Objective:

Use Excel to analyze the residuals from the model. Data file is Patients.xls

Residual Analysis - Freedom HospitalResidual Analysis - Freedom Hospital

Open file Patients.xls

Residual Analysis – Freedom Hospital

First click on Tools, then Data Analysis and then on Regression.

Residual Analysis – Freedom Hospital

Define range for X and Y Variables and then check boxes for Residuals and Residual Plots.

Residual Analysis – Freedom Hospital

At the bottom of the regression output (note the row number) the residual for each observation is given.

Residual Analysis – Freedom Hospital

The regression output will also plot the residuals.

Residual Analysis – Freedom Hospital