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17 May 2018
NAPA auto parts has developed a model to explain store sales. It takes the form:
Y= B + Bx+Cx+Dx+Ex+Fx
Where Y is a storeâs sales, X1 is average age of cars within 5 miles, X2 is average income within 5 miles, X3 is number of competitors within 5 miles, and X4 is percentage of cars over 8 years old. When the model is run without X4, the X1 variable has a t-statistic of 4.2, but when the X4 variable is included in the model the X1âs t-statistic falls to 1.3. Why did this happen, and what should be done to make this model better? Explain what the t-statistic tells the investigator.
NAPA auto parts has developed a model to explain store sales. It takes the form:
Y= B + Bx+Cx+Dx+Ex+Fx
Where Y is a storeâs sales, X1 is average age of cars within 5 miles, X2 is average income within 5 miles, X3 is number of competitors within 5 miles, and X4 is percentage of cars over 8 years old. When the model is run without X4, the X1 variable has a t-statistic of 4.2, but when the X4 variable is included in the model the X1âs t-statistic falls to 1.3. Why did this happen, and what should be done to make this model better? Explain what the t-statistic tells the investigator.
Jamar FerryLv2
18 May 2018
