Seeing the Future

CHAPTER 5

Simple Linear Regressions

Rea tells the class a story about his Realmart Company. A customer asked him, “You provided me with numerous sale prices of the past and nothing else. Do you really believe that these past prices are the only factors that affect future prices in the real estate market?” Rea admitted that many other factors might affect consumer spending and the subsequent home prices, but he did not know how to incorporate these determinants into his analysis. He promised the customer that in three weeks he would find out how to account for these factors.

Ex says that he too heard that China’s yuan had appreciated 10 percent against the U.S. dollars from 2010 to 2013 before it tumbled 2 percent in 2014. He wants to how this ...