BUSINESS ANALYTICS

Submitted by
EX-PGDM 2016-17

Group No. 4

1. AASHNA KAUR Roll No. 16XPGDM01

2. ABHISHEK SHARMA Roll No.

16XPGDM02

3. ATUL Roll No. 16XPGDM05

4. GAURAV KR. DOLEY Roll No.

16XPGDM10

We have taken the data below to find out the chicken consumption which is our
dependent variable.
 X4: X6:
X3: Real X5: Composite
Real Retail Real Real Price
Y : Per Retail Price Retail of
Capita X2 : Real Price of of Price Chicken
Consumptio Disposable Chicke Pork of Beef Substitute
n of Income n Per Per Per s Per
Chickens, Per Pound, Pound, Pound, Pound,
YEAR Pounds Capita, $ Cents Cents Cents Cents
1960 27.8 397.5 42.2 50.7 78.3 65.8
1961 29.9 413.3 38.1 52 79.2 66.9
1962 29.8 439.2 40.3 54 79.2 67.8
1963 30.8 459.7 39.5 55.3 79.2 69.6
1964 31.2 492.9 37.3 54.7 77.4 68.7
1965 33.3 528.6 38.1 63.7 80.2 73.6
1966 35.6 560.3 39.3 69.8 80.4 76.3
1967 36.4 624.6 37.8 65.9 83.9 77.2
1968 36.7 666.4 38.4 64.5 85.5 78.1
1969 38.4 717.8 40.1 70 93.7 84.7
1970 40.4 768.2 38.6 73.2 106.1 93.3
1971 40.3 843.3 39.8 67.8 104.8 89.7
1972 41.8 911.6 39.7 79.1 114 100.7
1973 40.4 931.1 52.1 95.4 124.1 113.5
1974 40.7 1021.5 48.9 94.2 127.6 115.3
1975 40.1 1165.9 58.3 123.5 142.9 136.7
1976 42.7 1349.6 57.9 129.9 143.6 139.2
1977 44.1 1449.4 56.5 117.6 139.2 132
1978 46.7 1575.5 63.7 130.9 165.5 132.1
1979 50.6 1759.1 61.6 129.8 203.3 154.4
1980 50.1 1994.2 58.9 128 219.6 174.9
1981 51.7 2258.1 66.4 141 221.6 180.8
1982 52.9 2478.7 70.4 168.2 232.6 189.4

In the data above the below mentioned variables are independent variables
which are affecting the chicken consumption.

X3: X4: X5: X6:

Real Real Real Composite
Retail Retail Retail Real Price
Price of Price Price of Chicken
X2 : Real Chicken of Pork of Beef Substitutes
Disposable Per Per Per Per
Income Per Pound, Pound, Pound, Pound,
YEAR Capita, $ Cents Cents Cents Cents
First we run the model and in the equation window, we landed up with this:

Using matrix notation, the standard regression may be written as:

where Y is a -dimensional vector containing observations on the dependent

variable, is a matrix of independent variables, is a -vector of
coefficients, and is a -vector of disturbances. is the number of observations
and is the number of right-hand side regressors.
In the output above, is PC, consists of three variables DISP, PRBF and
PRCOMP, where T=23 and .

Where we can see DISP, PRBF and PRCOMP are not in a good probability are their
value are greater than 0.05
Adjusted R-square value is also not acceptable as it is 92.7%.
After several adjustments we are able to find out a good model to come up with
the solution.
All the independent variables are accepted as well as F-statistic and Adjusted R-
Squared appeared to be acceptable at 96%.
After that we will check for multi- collinearity
Variance Inflation Factors
Variance Inflation Factors (VIFs) are a method of measuring the level of
collinearity between the regressors in an equation. VIFs show how much of the
variance of a coefficient estimate of a regressor has been inflated due to
collinearity with the other regressors. They can be calculated by simply dividing
the variance of a coefficient estimate by the variance of that coefficient had
other regressors not been included in the equation.

There are two forms of the Variance Inflation Factor: centered and uncentered.
The centered VIF is the ratio of the variance of the coefficient estimate from the
original equation divided by the variance from a coefficient estimate from an
equation with only that regressor and a constant. The uncentered VIF is the ratio
of the variance of the coefficient estimate from the original equation divided by
the variance from a coefficient estimate from an equation with only one
regressor (and no constant). Note that if you original equation did not have a
constant only the uncentered VIF will be displayed.

The centered VIF is numerically identical to where is the R-squared

from the regression of that regressor on all of the other regressors in the
equation.
Note that since the VIFs are calculated from the coefficient variance-covariance
matrix, any robust standard error options will be present in the VIFs.
As we can analyse all the variables are less than or near to 10, so it is accepted
as no multi-collinearity in the model.
Then we will check for LM Test.
Before you use an estimated equation for statistical inference (e.g. hypothesis
tests and forecasting), you should generally examine the residuals for evidence
of serial correlation. EViews provides several methods of testing a specification
for the presence of serial correlation.
The Durbin-Watson Statistic
EViews reports the Durbin-Watson (DW) statistic as a part of the standard
regression output. The Durbin-Watson statistic is a test for first-order serial
correlation. More formally, the DW statistic measures the linear association
between adjacent residuals from a regression model. The Durbin-Watson is a test
of the hypothesis in the specification:

Serial Correlation LM Test

Selecting View/Residual Diagnostics/Serial Correlation LM Test carries out the

Breusch-Godfrey Lagrange multiplier test for general, high-order, ARMA errors. In
the Lag Specification dialog box, you should enter the highest order of serial
correlation to be tested.
The null hypothesis of the test is that there is no serial correlation in the
residuals up to the specified order. EViews reports a statistic labeled F-statistic

and an Obs*R-squared ( the number of observations times the R-square)

statistic. The statistic has an asymptotic distribution under the null

hypothesis. The distribution of the F-statistic is not known, but is often used to
conduct an informal test of the null.
The test rejects the hypothesis of no serial correlation. Residuals are serially
correlated and the equation should be re-specified before using it for hypothesis
tests and forecasting.
Durbin-Watson stat is near to 2, which clearly indicates that no serial correlation.