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MGTSC 312: Lab 9

In this lab session of MGTSC 312, we focus on the Loglinear Model by analyzing Canadian GDP data from 1961 to 1989. You'll learn to create scatter graphs, apply linear and exponential trendlines, and utilize Excel's functionalities such as the LN() function for logarithmic transformations. We'll explore regression analysis to find growth factors and rates, comparing predicted GDP values from loglinear and linear models with actual figures. The session includes memo formatting guidelines for Homework 8 and upcoming deadlines.

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MGTSC 312: Lab 9

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  1. MGTSC 312: Lab 9 November 24, 2011 - Transformations

  2. Announcements • Hw 7 is due this Friday at 11:59 p.m. DO NOT SUBMIT LATE! • Hw 8 is due on December 6 at 11:59 p.m. DO NOT SUBMIT LATE! • Lab Exam 3 is next Thursday December 1 -For coverage please see the Exam 3 materials link under “Exams and Quizzes” MGTSC 312: Lab 9 - Loglinear Model

  3. Agenda • Evaluation Survey • Today’s lab relates to Topic 10 • GDP data • Linear Model • LoglinearModel • Memo Formatting MGTSC 312: Lab 9 - Loglinear Model

  4. Look at the Data • Canadian Gross Domestic Product (GDP) • Quarterly from 1961Q1 to 1989Q4 • Use the graph wizard to create a scattergraph • Does the graph look like a straight line? • Is there any repeating pattern? • Add a linear trendline and an exponential trendline • The exponential looks like a much better fit • The exponential corresponds to regressing the natural logarithm of GDP on Time, which is what we’re about to do MGTSC 312: Lab 9 - Loglinear Model

  5. Transform the Data • Let’s create a new dependent variable for a regression, the natural log of GDP • Use Excel’s =LN() function • Create a line graph for LnGDP vs. year/quarter • Does it look like a straight line? • Change the y-axis scale to use all of the available space! • We also need to change the time to just numbers, starting at 1 and counting by 1 to 116 (which is just Obs #) MGTSC 312: Lab 9 - Loglinear Model

  6. Regress GDP and lnGDP on Time • Insert a new ‘Regress’ worksheet for the output • Regress lnGDP the same way and put the output beside the first • R2 and Ftest are even larger, but the scale is different so R2 is not comparable MGTSC 312: Lab 9 - Loglinear Model

  7. Find the Growth Factor and Rate • The quarterly growth factor is EXP(b1) = 1.0268 • The annual growth factor is the quarterly growth factor to the power of 4 = 1.1116 • The quarterly growth rate as a percent • 100*(quarterly growth factor - 1) = 2.68% • The annual growth rate as a percent • 100*(annual growth factor - 1) = 11.16% • On average GDP increased by about 11.16% per year from 1961 through 1989 – looks pretty large compared to the last year! MGTSC 312: Lab 9 - Loglinear Model

  8. Predicted GDP from Loglinear • Copy the Predicted lnGDP from the loglinear regression and paste to another sheet • Calculate the predicted GDP as =EXP(predicted lnGDP) • Beside that column, copy and paste the predicted GDP from the linear model (Note the negative values!) • Beside that column, copy and paste the actual GDP MGTSC 312: Lab 9 - Loglinear Model

  9. Predicted GDP and Actual MGTSC 312: Lab 9 - Loglinear Model

  10. Plot Both Predicted versus Actual • Loglinear is a much better fit for the data MGTSC 312: Lab 9 - Loglinear Model

  11. Does Quarter Add Anything? • If there’s time, let’s see whether the quarter of the year makes a difference • Add Quarter with =VALUE(RIGHT(B2,1)) • Add quarter dummies with =IF() as we’ve done previously • Regress lnGDP on Time and three quarter dummies • Two of the quarter dummies have p-values < 0.01 • Perform a Partial F test • p-value = 1.1E-7 • The quarter dummies improve the fit, so use all 3 MGTSC 312: Lab 9 - Loglinear Model

  12. Does Quarter Add Anything? MGTSC 312: Lab 9 - Loglinear Model

  13. Memo Formatting

  14. Memo Formatting • The first part of the file tells you how to format the HW 8 file, but doesn’t follow its own instructions • Let’s make the file follow the rules • There are often several ways to accomplish the same task in Word; use your favourite • If the rulers are not visible go to View > Show/Hide > Ruler and drag the margin markers • Or go to Page Layout > Margins • Home > Select > Select All • Font Times New Roman 11 pt • Paragraph > Spacing: Single, Before (or After) 6 pts, or 3 pts before and 3 pts after. Ensure the “Don’t Add Space…” box remains unchecked • Grammar and Spell checking • Office button > Word Options > Proofing • Office button > Save As > Word ‘97 – 2003 document MGTSC 312: Lab9 – Loglinear Model

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