How do you test the covariation between two continuous variables? Most typically: One independent variable and: One dependent variable Marketing Research 7/17/2016 2 Types of Relationships Scatterplot Diagrams Y Y X X No Apparent Relationship Between X and Y Perfect Positive Relationship Between X and Y Y Y X Perfect Negative Relationship Between X and Y X Parabolic Relationship Between X and Y 3 Types of Relationships Scatterplot Diagrams Y Y X General Negative Relationship Between X and Y X General Positive Relationship Between X and Y Y Y X Negative Curvilinear Relationship Between X and Y X No Apparent Relationship Between X and Y 4 Marketing Research 7/17/2016 5 Marketing Research 7/17/2016 6 Marketing Research 7/17/2016 7 examines the strength of the relationship between two continuous variables range: ◦ between -1 (perfect inverse relationship), ◦ through 0 (no relationship at all) ◦ to +1 (perfect positive relationship) Marketing Research 7/17/2016 8 Marketing Research 7/17/2016 9 Marketing Research 7/17/2016 10 Marketing Research 7/17/2016 11 Marketing Research 7/17/2016 12 Marketing Research 7/17/2016 13 Marketing Research 7/17/2016 14 Correlation Assessing Measures of Association Measure of Association using interval or ratio data. Measure of Association using ordinal or rank order data. 15 How do you test the covariation between one continuous independent variable ◦ (e.g., age, income) and: one continuous dependent variable ◦ (e.g., cost of automobile purchased) Marketing Research 7/17/2016 16 Least-Square Estimation Procedure • Used to fit data for X and Y • Enables estimation of non-plotted data points • Results in a straight line that fits the actual observations (plotted dots) better than any other line that could be fit to the observations. Y X 17 Liquor Consumption # Churches Correlations EXAM_1 EXAM_2 REVIEW_1 Pears on Correlation Sig. (1-tailed) N Pears on Correlation Sig. (1-tailed) N Pears on Correlation Sig. (1-tailed) N EXAM_1 1.000 . 42 .334* .015 42 .226 .075 42 EXAM_2 REVIEW_1 .334* .226 .015 .075 42 42 1.000 .438** . .002 42 42 .438** 1.000 .002 . 42 42 *. Correlation is s ignificant at the 0.05 level (1-tailed). **. Correlation is s ignificant at the 0.01 level (1-tailed). Marketing Research 7/17/2016 19 Yi = B0 + B1 X1 + ei ◦ Y is the dependent variable (estimated outcome) ◦ B0 is the value of Y when X = 0 (the Y intercept) ◦ B1 is the rate at which Y changes for every unit change in X (the slope) ◦ and e is the error in the model Marketing Research 7/17/2016 20 Test statistic: H0: B1 = 0 Ha: B1 does not = 0 Marketing Research 7/17/2016 21 Marketing Research 7/17/2016 22 Coefficientsa Unstandardized Coefficients Model 1 (Constant) EXAM_1 B 51.344 .291 Std. Error 10.047 .130 Standardized Coefficients Beta .334 t 5.110 2.242 Sig. .000 .031 a. Dependent Variable: EXAM_2 Marketing Research 7/17/2016 23 Yi = B0 + B1 X1 +B2 X2 + B3 X3 +e ◦ where each of the Betas estimate the effect of one independent variable. This allows the regression to "control" for each of the other factors simultaneously ◦ e.g., control for exercise, eating habits, AND fish consumption on heart attacks. Marketing Research 7/17/2016 25 Too complicated by hand! Ouch! Relationship between 1 dependent & 2 or more independent variables is a linear function Population Y-intercept Population slopes Random error Yi 0 1X 1i 2 X 2i k X ki i Dependent (response) variable Independent (explanatory) variables Bivariate model 1. Slope (^k) ^ ◦ Estimated Y Changes by k for Each 1 Unit Increase in Xk Holding All Other Variables Constant ^ 2. Y-Intercept (0) ◦ Average Value of Y When Xk = 0 Proportion of Variation in Y ‘Explained’ by All X Variables Taken Together SS yy SSE Explained variation SSE R 1 Total variation SS yy SS yy 2 If you add a variable to the model ◦ How will that affect the R-squared value for the model? R2 Never Decreases When New X Variable Is Added to Model ◦ Only Y Values Determine SSyy ◦ Disadvantage When Comparing Models Solution: Adjusted R2 ◦ Each additional variable reduces adjusted R2, unless SSE goes up enough to compensate Coefficientsa Model 1 (Constant) EXAM_1 EXAM_2 REVIEW_1 Unstandardized Coefficients Std. B Error 56.730 75.172 1.626 .791 8.E-02 .983 .949 .656 Standardized Coefficients Beta .319 .013 .235 t .755 2.056 .080 1.446 Sig. .455 .047 .937 .156 a. Dependent Variable: TOTAL Marketing Research 7/17/2016 33 34