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Exercises · Q12
Q.

The following table shows the advertising expenditure (xx, in ₹'000) and sales (yy, in ₹'0000) of a company over 5 quarters. Find (i) Pearson's correlation coefficient, (ii) the regression coefficients byxb_{yx} and bxyb_{xy}, and (iii) the regression line of yy on xx.

Quarter12345
Advertising expenditure (xx)12345
Sales (yy)65798
West Bengal WbchseTextbookSubjectiveImportance★★★★★est
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Step 1 — Find the means. xˉ=1+2+3+4+55=155=3\bar x = \dfrac{1+2+3+4+5}{5}=\dfrac{15}{5}=3. yˉ=6+5+7+9+85=355=7\bar y=\dfrac{6+5+7+9+8}{5}=\dfrac{35}{5}=7.

Step 2 — Tabulate deviations, products, and squares.

xxyyx−xˉx-\bar xy−yˉy-\bar y(x−xˉ)(y−yˉ)(x-\bar x)(y-\bar y)(x−xˉ)2(x-\bar x)^2(y−yˉ)2(y-\bar y)^2
16−2−1241
25−1−2214
3700000
4912214
5821241
Total81010

Step 3 — Part (i): Pearson's correlation coefficient.

r=81010=810=0.8r = \dfrac{8}{\sqrt{10}\sqrt{10}} = \dfrac{8}{10} = 0.8

Step 4 — Part (ii): the regression coefficients.

byx=810=0.8bxy=810=0.8b_{yx} = \dfrac{8}{10} = 0.8 \qquad\qquad b_{xy} = \dfrac{8}{10} = 0.8

Check: byxbxy=0.8×0.8=0.64=r2b_{yx}b_{xy} = 0.8\times0.8=0.64=r^2 (since r=0.8r=0.8, r2=0.64r^2=0.64) — matches.

Step 5 — Part (iii): the regression line of yy on xx. …

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