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Lecture 9

QMB 3600 Lecture Notes - Lecture 9: South Texas High School For Health Professions, Dependent And Independent Variables
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2 Pages
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Fall 2018

Department
Quantitative Methods in Bus
Course Code
QMB 3600
Professor
Evan Jaffe
Lecture
9

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LOW
MED
HIGH
Prob:
0.3
0.5
0.2
SUMPRODUCT
A
120,000
255,000
390,000
241500
B
130,000
295,000
460,000
278500
EV
w/o PI
C
100,000
300,000
480,000
276000
Optimistic (maxi-max): best possible outcome w/ best payoff. Pick biggest value in table.
Conservative (maxi-min)-guaranteed min possible payout. Pick biggest value in smallest column.
Mini max- must build regret table
Regret
Table
HIGH
0.5
A
480-360=120
B
480-460=20
mini-max
C
480-480=0
Regression:
Variable being predicted, the dependent variable, is the y
Variable being used to predict, the independent variable, is the x
Multiple R- coefficient of correlation: always b/t -1 and +1. Must check sign of slope to see if positive or negative.
What is min expect opp. Loss? -> EV of PI
to max. profits? <- EV w/o PI
Highest val you’d pay for reliable forecast?-> EV of PI
Max Expect payoff? -> EV w/o P
EV of PI= (EV w/PI)- (EV w/o PI)
EV w/PI=(highest val) x prob per situation w/best payoff
Efficiency of SI= (EV of SI/EV of PI) x 100
<- Take lowest regret
Dependent=yint + slope (independent variable)
Dependent=yint +slope(interest rate) +slope (ind. Variable)

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Description
What is min expect opp. Loss? -> EV of PI LOW MED HIGH Prob: 0.3 0.5 0.2 SUMPRODUCT to max. profits? EV of PI B 130,000 295,000 460,000 278500 wo PI Max Expect payoff? -> EV wo P C 100,000 300,000 480,000 276000 EV of PI= (EV wPI)- (EV wo PI) EV wPI=(highest val) x prob per situation wbest payoff Optimistic (maxi-max): best possible outcome w best payoff. Pick biggest value in table. Efficiency of SI= (EV of SIEV of PI) x 100 Conservative (maxi-min)-guaranteed min possible payout. Pick biggest value in smallest column. Mini max- must build regret table Regret Table LOW MED HIGH 0.3 0.2 0.5 max regret A 130-120=10 300-255=45 480-360=120 90 B 130-130=0 300-295=5 480-460=20 20 mini-max
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