Summary: Business Analytics

Read the summary and the most important questions on Business Analytics

• 1 Notes 1 Introduction

• 1.1 Introduction

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• What is business analytics?

  The ability of firms/organizations to collect, analyze and act on data

• What is the definition of causal analysis

  Independent variables are regarded as causes of the dependent variable. The goal is to determine whether a particular independent variable really affects the dependent variable, and to estimate the magnitude of that effect, if any.

• What is the main difference between the two estimation problems: prediction and causal inference?

  Prediction questions what will happen? And causal inference questions why will this happen?

• Which estimation technique can be used for both prediction and causal inference?

  Ordinary Least Squares (OLS) estimation

• What is the definition of predictive modelling with use of OLS estimation?

  Estimate Conditional mean E(y|x)

• What is the definition of causal estimation with use of OLS estimation

  Estimate partial derivative (slope parameter) with respect to some xj

• Under which assumption can both prediction and causal inference be achieved simultaneously by OLS?

  The assumption of zero conditional mean: E(u|x) = 0

• Why doesn't the error term E(u|x) play a role in prediction

  Because the prediction is based on what we're observing and the error term is something we do not observe.

• What is the reason that causal interpretation of predicted beta_j fails if error term E(u|x_j) is not equal to 0?

  Then you get a biased estimate because you're specific x would otherwise be depended on the error term.

• What does the ceteris paribus analysis measure?

  Effect of x_j on y