Quantitative Analysis for Management, 13/e

4.11 Cautions and Pitfalls in Regression Analysis

This chapter has provided a brief introduction to regression analysis, one of the most widely used quantitative techniques in business. However, some common errors are made with regression models, so caution should be observed when using them.

If the assumptions are not met, the statistical tests may not be valid. Any interval estimates are also invalid, although the model can still be used for prediction purposes.

Correlation does not necessarily mean causation. Two variables (such as the price of automobiles and your annual salary) may be highly correlated to one another, but one is not causing the other to change. They may both be changing due to other factors such as the economy in general ...