Sales Comparison Using Regression Analysis

7 important questions on Sales Comparison Using Regression Analysis

What are the two strengths of a regression analysis

(1) It can be used to value a large number of properties quickly and economically,
(2) It can be used to explain value as well as to estimate it

What is A Scatter Diagram

A scatter diagram shows the relationship between two variables by pointing the results of the analysis into the diagram an drawing a line.

What kind of independent variables could be used for the regression analysis

- The number of bedrooms
- The number of bathrooms
- Garage size
- Lot size
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What is the meaning of r2 in multiple regression analysis

r2 is the coefficient of (multiple) determination. So for instance, when the r2 is 0.925 it tells us that the independent variables used in the example explained .925 of the variation in the selling price of the sample. Only .075 is explained by other (omitted) variables.

What are the three potential errors of a simple regression analysis?

(1) inferring causation between the independent and dependent variables
(2) finding spurious relationship
(3) unwarranted extrapolation and trending

What is the definition of multicollinearity as an error in the regression analysis?

The situation were two or more independent variables at least partly measure the same thing.

What are the three indicators for a missing independent variable

The three symptoms of a missing independent variable are:
(1) a low r2
(2) "suprising" coefficients for the variables that are in the equation
(3) identifiable patterns in the regression residuals

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