Tunis business school Academic year : 2024-2025

Course : Econometrics Dr.Fedya Telmoudi, Dr. Amira Dridi,

Dr. Ibtissem Issaoui

Tutorial 1 : Simple linear regression

Exercise 1 :

On a machine that folds plastic film the temperature may be varied in the range of 130-185°C.
For obtaining, if possible, a model for the influence of temperature on the folding thickness,
n = 12 related set of values of temperature and the fold thickness were measured that is
illustrated in the following figure:

Determine by looking at the figure, which of the following sets of estimates for the parameters
in the usual regression model is correct:
1) 𝛽 = 0, 𝛽 = −0.9, 𝜎 = 36 3 is correct. Looking at the figure, the slope is positive (b1),
when x=0, y is positive (b0>0), and there is a strong
2) 𝛽 = 0, 𝛽 = 0.9, 𝜎 = 3.6 relationship between the variables (small error)

3) 𝛽 = 252, 𝛽 = −0.9, 𝜎 = 3.6

4) 𝛽 = −252, 𝛽 = −0.9, 𝜎 = 36
5) 𝛽 = 252, 𝛽 = −0.9, 𝜎 = 36

Exercise 2 :
A statistics professor wants to use the number of hours a student studies for a statistics final
exam (X) to predict the final exam score (Y). A regression model was fit based on data collected
from a class during the previous semester, with the following results:

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Y: the predicted final exam score depending on the number of hours studied X.
b1=3. The equation tells us that the mean value of the final exam score increases by 3 for each additional hour.
b0=35. If the number of hours studied has no influence, the final exam score would be 35.

𝑌 = 35 + 3𝑋
What is the interpretation of the Y intercept, b0 and the slope b1.

Exercise 3 :
The marketing manager of a large supermarket chain would like to use shelf space to predict
the sales of pet food. A random sample of 12 equal-sized stores is selected, with the following
results :

Part A :
1- Construct a scatter plot.
2- Assuming a linear relationship, use the least-squares method to determine the regression
coefficients b0 and b1.
The Mean value of weekly sales increases by 7.4
3- Interpret the meaning of the slope, in this problem. when the shelf space increases by one unit
4- Predict the weekly sales of pet food for stores with 8 feet of shelf space for pet food.
Part B :
The marketing manager used shelf space for pet food to predict weekly sales. For those data
SSR= 20.535 and SST=30.025. r=SSR/SST=0.684 68.4% of the variation in
weekly sales is explained
5- Determine the coefficient of determination, r² and interpret its meaning. by shelf space
6- Determine the standard error of the estimate. SSE=SST-SSR=9.49
7- How useful do you think this regression model is for predicting sales?

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Exercise 4 :
1- How do you interpret a coefficient of determination, equal to 0.80? 80% of the variation in Y is
explained by X
2- If SSR=36 and SSE=4 determine SST, then compute the coefficient of determination,
r=SSR/SST=0.9 90% of the variation in Y is
and interpret its meaning. SST=SSR+SSE=40 explained by X
3- If SSE=10 and SSR= 30 compute the coefficient of determination, and interpret its
meaning. SST=40 r=SSR/SST=0.75 75% of the variation in Y is explained by X

Exercise 5 :
In Exercise 3 manager used shelf space for pet food to predict weekly sales. Perform a residual
analysis for these data. Evaluate whether the assumptions of regression have been seriously
violated.

Exercise 6 :
The residuals for 10 consecutive time periods are as follows:

1- Plot the residuals over time. What conclusion can you reach about the pattern of the
residuals over time?
2- Based on (a), what conclusion can you reach about the autocorrelation of the residuals?
Exercise 7 :
In exercise 3 concerning pet food sales, the marketing manager used shelf space for pet food
to predict weekly sales.
1- Is it necessary to compute the Durbin-Watson statistic in this case ? Explain.
2- Under what circumstances is it necessary to compute the Durbin-Watson statistic before
proceeding with the least-squares method of regression analysis?
Exercise 8 :
A mail-order catalog business that sells personal computer supplies, software, and hardware
maintains a centralized warehouse for the distribution of products ordered. Management is
currently examining the process of distribution from the warehouse and is interested in studying
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the factors that affect warehouse distribution costs. Currently, a small handling fee is added to
the order, regardless of the amount of the order. Data that indicate the warehouse distribution
costs and the number of orders received have been collected over the past 24 months.
1- Assuming a linear relationship, use the least-squares method to find the regression
coefficients b0 and b1
2- Predict the monthly warehouse distribution costs when the number of orders is 4,500.
3- Plot the residuals versus the time period.
4- Compute the Durbin-Watson statistic. At the 0.05 level of significance, is there evidence
of positive autocorrelation among the residuals?
5- Based on the results of (3) and (4), is there reason to question the validity of the model?

Exercise 9 :
In Exercise 3, the marketing manager used shelf space for pet food to predict weekly sales.

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 1- At the 0.05 level of significance, is there evidence of a linear relationship between shelf
space and sales?
2- Construct a 95% confidence interval estimate of the population slope 𝛽 .
Exercise 10 :
The data regarding the production of wheat in tons (X) and the price of the kilo of flour in
pesetas (Y ) in the decade of the 80's in Spain were:

Wheat 30 28 32 25 25 25 22 24 35 40
production
Flour price 25 30 27 40 42 40 50 45 30 25

1- Fit the regression line using the method of least squares.

2- Interpret the results.
3- Compute the residual variance.
4- Compute a 95% confidence interval for the slope of the regression line
5- Test the hypothesis that the price of flour depends linearly on the production of
wheat, using a 0.05 significance level
6- Compute a 95% confidence interval for the intercept of the regression line
7- Test the hypothesis that the regression line passes through the origin, using a
0.05 significance level

Exercise 11 :

Movie companies need to predict the gross receipts of an individual movie once the movie has
debuted. The following results are the first weekend gross, the U.S. gross, and the worldwide
gross (in $millions) of the six Harry Potter movies that debuted from 2001 to 2009:

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 1- Compute the coefficient of correlation between first weekend gross and the U.S. gross,
first weekend gross and the worldwide gross, and the U.S. gross and worldwide gross.
2- At the 0.05 level of significance, is there a significant linear relationship between first
weekend gross and the U.S. gross, first weekend gross and the worldwide gross, and the
U.S. gross and worldwide gross?

Exercise 12
In Exercise 3, the marketing manager used shelf space for pet food to predict weekly sales. For
these data, SYX=30.81 and hi=0.1373 when X=8.
1- Construct a 95% confidence interval estimate of the mean weekly sales for all stores
that have 8 feet of shelf space for pet food.
2- Construct a 95% prediction interval of the weekly sales of an individual store that has 8
feet of shelf space for pet food.
3- Explain the difference in the results in (1) and (2).