STA 316: APPLIED REGRESSION ANALYSIS I CAT1

Instruction: Attempt all questions

Question 1
The share price, in shillings, of a certain company is monitored over 8-year period. The
results are show in the table below.
Time (years) X 0 1 2 3 4 5 6 7 8
Price (Y) 100 131 183 247 330 454 601 819 1095

An actuary fits the following simple linear model to the data:

yi =  0 + 1x i + ei i=0,1,...,8

Where ei  are independent normal random variables with mean zero and variance  2 .

(a) Determine the fitted regression line in which the price is modeled as the response
and the time as an explanatory variable.
(b) Obtain a 99% confidence interval for  , the underlying slope parameter

(c) Investigate if time is significant at 1% level of significance.

(d) State the “total sum of squares” and calculate its portion into the regression sum of
squares and the residual sum of squares.
(e) Use the values in part (d) to calculate the proportion of variability explained by the
model and comment on result.
Question 2
An advertising company evaluated three of television ads for a new, low-cost, sub-
compact automobile: visual appeal ads, budget appeal ads and feature appeal ads. To
control for age differences, viewers from four age groups were chosen to evaluated the
persuasiveness of the ads (as measured on a scale from 1 to 10, where 1 represented the
lowest level persuasion, and 10 the highest). Within each age group were six viewers; two
each were randomly assigned to view one of the three types of ads. The sample
persuasion scores are presented in the following table.

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 Type of Ad (factor A)

Viewer Age Visual Budget Feature

Factor(B) Appeal(V) Appeal (B) Appeal(F)

12-25 years 6,5 8,7 5,4

26-35 years 7,6 9,10 4,8

36-45 years 8,9 9,8 4,2

46 and above 10,9 10,8 5,4

By assuming a two factor ANOVA model of the form:

yijk    i   j  ( )ij   ijk

where  is the overall mean,  i is the effect of the ith level for factor A, and  j is the

effect of the jth level for factor B. Determine whether significant main effects exist due
to ad type and viewer age, and whether these factors significantly interact.

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