Business Statistics

Chapter 14 | Simple Linear Regression Analysis 471

2

Regression sum of squares SSR

Total sum of squares SST

= =r

In Example 14.1, coefficient of determination r

2

can be calculated as

2

Regression sum of squares SSR 125,197.4582

0.9009

Total sum of squares SST 138,966.6667

r = = = =

As discussed, the coefficient of determination leads to an important interpretation of the regres-

sion model. In Example 14.1, r

2

is calculated as 0.9009. This indicates that 90.09% of the variation in

sales can be explained by the independent variable, that is, advertisement. This result also explains

that 9.91% of the variation in sales is explained by factors other ...