CHAPTER 10Regression and Time Series

10.1 Introduction

Imagine you work in the finance department of a company that supplies machine parts to manufacturers of several different types of home appliances. These appliances are considered durable consumer goods because they last for a long time and buyers don't need to replace them frequently. A washing machine is a good example of a durable consumer product while the laundry detergent used in the machine is a nondurable consumer good.

Intuition and experience indicate that your sales increase when consumers are more confident in their outlook for the US economy. Confident consumers feel better about their job prospects so they're more likely to buy big-ticket items than when they're concerned about losing their jobs. If you could quantify the relationship between consumer confidence and demand for consumer durables with reasonable accuracy, you could use economic data in planning your production and inventory levels more accurately.

This chapter explores regression and time series analysis, two methods for exploring and modeling data.

Required software: MATLAB® base program and MATLAB Statistics and Machine Learning Toolbox™

10.2 Basic Regression

Regression quantifies the relationship between an independent variable or multiple independent variables and a dependent variable. That relationship then can be used to forecast future values for the dependent value, assuming the past relationship between the variables continues to ...

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