Slides Module 4 Lesson 6

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Linear Regression for Business Statistics

Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.

 Log-log as well as the Semi-log interpretation.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.

 Log-log as well as the Semi-log interpretation.

 1 and 2 is a log-log interpretation, a.k.a. Elasticity interpretation.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Example: Annual demand for cocoa in million pounds over a period of time.

 Log-log as well as the Semi-log interpretation.

 1 and 2 is a log-log interpretation, a.k.a. Elasticity interpretation.

 3 is a semi-log interpretation, a.k.a. Growth Rate interpretation.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

 Natural logs may be taken for reasons other than improving


R-square.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

 Natural logs may be taken for reasons other than improving


R-square.

 When we want ‘Betas’ to be interpreted as Elasticities or Growth


Rates.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

 Natural logs may be taken for reasons other than improving


R-square.

 When we want ‘Betas’ to be interpreted as Elasticities or Growth


Rates.

 Two main reasons for taking a natural log transformation.

1. Improve Linearity.

2. Have ‘Betas’ be interpreted as Elasticities or Growth Rates.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

 Natural logs may be taken for reasons other than improving


R-square.

 When we want ‘Betas’ to be interpreted as Elasticities or Growth


Rates.

 Two main reasons for taking a natural log transformation.

1. Improve Linearity.

2. Have ‘Betas’ be interpreted as Elasticities or Growth Rates.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

 Natural logs may be taken for reasons other than improving


R-square.

 When we want ‘Betas’ to be interpreted as Elasticities or Growth


Rates.

 Two main reasons for taking a natural log transformation.

1. Improve Linearity.

2. Have ‘Betas’ be interpreted as Elasticities or Growth Rates.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

 Natural logs may be taken for reasons other than improving


R-square.

 When we want ‘Betas’ to be interpreted as Elasticities or Growth


Rates.

 Two main reasons for taking a natural log transformation.

1. Improve Linearity.

2. Have ‘Betas’ be interpreted as Elasticities or Growth Rates.


Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Predict the cocoa demand for the following year and build a 95%
confidence interval around the prediction.
Assume, for the following year, the price to be 1.15$ per pound and
the per-capita income to be 40,000$.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Predict the cocoa demand for the following year and build a 95%
confidence interval around the prediction.
Assume, for the following year, the price to be 1.15$ per pound and
the per-capita income to be 40,000$.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Predict the cocoa demand for the following year and build a 95%
confidence interval around the prediction.
Assume, for the following year, the price to be 1.15$ per pound and
the per-capita income to be 40,000$.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Predict the cocoa demand for the following year and build a 95%
confidence interval around the prediction.
Assume, for the following year, the price to be 1.15$ per pound and
the per-capita income to be 40,000$.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

Predict the cocoa demand for the following year and build a 95%
confidence interval around the prediction.
Assume, for the following year, the price to be 1.15$ per pound and
the per-capita income to be 40,000$.
Linear Regression for Business Statistics
Natural Log transformation in a Regression Model.

The Log-log Model.

The Semi-log Model.

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