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Sectoral
AUTO 10386.45 10449.14 10232.45 10275.31 10829.10 7894.04 318578.58 4.90 58.36 1.70
BANKEX 13146.96 13219.06 12992.88 13104.89 13235.92 8947.37 671153.73 10.32 314.97 9.15
CD 6685.25 6743.77 6644.65 6732.06 6997.02 5062.96 47968.49 .74 36.90 1.07
CG 10933.73 11032.58 10843.57 10894.69 11615.08 7806.90 264321.10 4.06 136.45 3.96
FMCG 5221.86 5333.12 5207.74 5314.31 5481.40 3776.19 470865.92 7.24 292.74 8.51
HC 7346.79 7402.05 7339.92 7378.64 7794.11 5757.37 289437.60 4.45 57.41 1.67
IT 5962.69 6004.89 5950.51 5973.85 6361.42 5059.62 591652.74 9.10 105.27 3.06
METAL 10697.11 10769.70 10540.62 10563.01 12910.54 9191.03 577935.25 8.88 92.78 2.70
OIL&GAS 8718.28 8774.95 8656.84 8708.99 9282.81 7336.16 769323.76 11.83 174.84 5.08
POWER 2056.14 2065.92 2019.66 2033.49 2416.29 1725.21 443445.15 6.82 193.09 5.61
PSU 7479.54 7524.41 7394.13 7425.77 8062.60 6204.05 1647761.28 25.33 326.50 9.49
REALTY 1808.42 1859.77 1782.26 1840.77 2212.31 1347.79 82269.80 1.26 106.65 3.10
TECk 3443.43 3457.08 3428.34 3441.49 3739.40 3062.51 809721.02 12.45 150.38 4.37
Category/Index
Open High Low Close52 Week
Full MarketCapitalisation
Turnover
High Low ( Cr. )% to TotalMkt Cap
( Cr. )% to TotalTurnover
http://beta.bseindia.com/indices/indiceswatch.aspx?iname=AUTO&sensid=19&type=sect&graphpath=/applet/images/graf_appAUTO.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BANKEX&sensid=03&type=comp&graphpath=/applet/images/graf_appBANKEX.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSECD&sensid=04&type=sect&graphpath=/applet/images/graf_appBSE_CD.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSECG&sensid=02&type=sect&graphpath=/applet/images/graf_appBSE_CG.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEFMCG&sensid=06&type=sect&graphpath=/applet/images/graf_appBSEFMC.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEHC&sensid=08&type=sect&graphpath=/applet/images/graf_appBSE_HC.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEIT&sensid=10&type=sect&graphpath=/applet/images/graf_appBSE_IT.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=METAL&sensid=12&type=sect&graphpath=/applet/images/graf_appMETAL.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=OILGAS&sensid=14&type=sect&graphpath=/applet/images/graf_appOILGAS.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=POWER&sensid=15&type=sect&graphpath=/applet/images/graf_appPOWER.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEPSU&sensid=01&type=comp&graphpath=/applet/images/graf_appBSEPSU.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=REALTY&sensid=091&type=sect&graphpath=/applet/images/graf_appREALTY.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=TECK&sensid=02&type=comp&graphpath=/applet/images/graf_appTECK.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=TECK&sensid=02&type=comp&graphpath=/applet/images/graf_appTECK.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=REALTY&sensid=091&type=sect&graphpath=/applet/images/graf_appREALTY.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEPSU&sensid=01&type=comp&graphpath=/applet/images/graf_appBSEPSU.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=POWER&sensid=15&type=sect&graphpath=/applet/images/graf_appPOWER.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=OILGAS&sensid=14&type=sect&graphpath=/applet/images/graf_appOILGAS.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=METAL&sensid=12&type=sect&graphpath=/applet/images/graf_appMETAL.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEIT&sensid=10&type=sect&graphpath=/applet/images/graf_appBSE_IT.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEHC&sensid=08&type=sect&graphpath=/applet/images/graf_appBSE_HC.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSEFMCG&sensid=06&type=sect&graphpath=/applet/images/graf_appBSEFMC.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSECG&sensid=02&type=sect&graphpath=/applet/images/graf_appBSE_CG.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BSECD&sensid=04&type=sect&graphpath=/applet/images/graf_appBSE_CD.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=BANKEX&sensid=03&type=comp&graphpath=/applet/images/graf_appBANKEX.gifhttp://beta.bseindia.com/indices/indiceswatch.aspx?iname=AUTO&sensid=19&type=sect&graphpath=/applet/images/graf_appAUTO.gif7/31/2019 Chsp 5 Industry Analysis
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Current Price : Rs. 91.45**Face Value : Rs. 10 per share52 wk High / Low : Rs. 203.30 / Rs.65.30Total Traded Volumes : 704 shares**Market Cap : Rs. 204 crore**Sector : Construction &
EngineeringEPS (FY2012) : Rs. 2.68 per shareP/E (TTM) : 25.44 (x)^P/BV (TTM) : 0.42 (x)^Financial Year End : 1st April 31stMarch
BSE Scrip Name : SHRISTIBSE Scrip Code : 511411**as on 17th September, 2012; ^ ason June 2012
Shristi Infrastructure DevelopmentCorporation Ltd (SIDCL) commencedcommercial operationsin 1999 with headquartered in Kolkatta.
The company undertakes
infrastructureconstruction, infrastructuredevelopment as well as infrastructureconsultancy.
In construction space, the companybuilds roads, hotels, buildings andurban water systems.
Under infrastructure development,Shristi has undertaken projects likeintegrated townships, healthcare,hospitality, retail malls, logistics
hub, entertainment & sports facilities,commercial & residential complex,industrial park & SEZs.
It has a joint venture with Housingand Urban Development CorporationLimited (HUDCO), Asansol Durgapur
Development Authority, WestBengal etc.
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INDUSTRY ANALYSIS
Direction of Change for overall market neednot necessarily lead to similar changes in allindustry groups
Heavy goods industries( automobiles, rubber,steel, glass etc.) fare worse in economicrecession than do consumer goods industries &
services (food, telephone, power , banks)Individual companies
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Industry Analysis
Demands Key sectors or subdivisions of overalleconomic activity that influence
particular industries Relative strength or weakness of
particular industry or other
groupings under specific sets ofassumptions about economic activity
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Industry Performance Wide dispersion in rates of return indifferent industries
Performance varies from year to year Company performance varies within
industries
Risks vary widely by industry but arefairly stable over time
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Classification of Industries Distinct group of productive or profit making
enterprises- Product or Service chemical, airline, restaurant
etc.- Sensitiveness to Economic Activity cyclical,
defensive, and growth industry.- Cyclical industrys performance tends to bepositively related to economic activity automobile, homebuilders, paper companies etc.
- Defensive industries are pharmaceuticals
industries, electric & gas utilities- Growth industries are characterized by rapid
growth in sales and earnings
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Key Characteristics in Industry Analysis
Past Sales and earnings Performance Permanence Attitude of Government toward the
industry Labour Conditions Competitive Conditions Product
Differentiation Advantage, AbsoluteCost Advantage, Economies of Scale
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Standard Industrial
Classification (SIC) System classification based on what they
produce.
11 broad divisions; within eachdivision there are several majorindustry groups. Major groups within
each division are further subdividedinto smaller groups
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Evaluating the Industry
Life CycleFive Stage Model Pioneering development
Rapidly accelerating industry growth
Mature industry growth
Stabilization and market maturity Deceleration of growth and decline
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Industry Life Cycle
Pioneering Growth Stabilization DeclineStage Stage Stage Stage
Time
Sales
Rapid growthTech/Product New
Great OpportunityFor profitFew may surviveRiskiest
Significant
Expansionin SalesRate of growthmoderateCapital basewidened &strengthened
ModertaegrowthProductsbecomestandardised& lessinnovativeMarket full
ofcompetitorsBetter todisposeshares
Industry turn outto be in lossCos become
obsolete anddisappearSome that realizein advance enterinto new ventures
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Ranbaxy laboratories
Dr Reddy Lab.
CIPLA
Cadila Health Care
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Lupin Mereck
Pfizer Novartis
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Tata Tele 52 weeks H/L18.25/10.5
Day's High / Low 12.00 / 11.67
Previous Close /
Open 11.53 / 11.75
Wtd. Avg Price 11.88
Total Traded Value(Lakh)
31.46
TTQ / 2W Avg Q
(Lakh)2.65 / 8.34
Circuit Limits 13.83 / 9.23
Mkt. Cap. Full / Free Float (Cr.)
2,248 / 562
(in Cr.) Jun-12 Mar-12 FY11-12Revenue 659.48 651.51 2,488.44Net Profit -162.66 -123.40 -517.55
EPS -0.86 -0.65 -2.73Cash EPS -0.09 0.10 0.14OPM % 20.25 22.61 21.98NPM % -24.66 -18.94 -20.80
Bharti Air Tel 52 Weeks H/L412/238
Day's High / Low 267.00 / 264.30
Previous Close / Open 261.45 / 265.50
Wtd. Avg Price 265.50
Total Traded Value (Cr.) 2.78
TTQ / 2W Avg Q (Lakh) 1.05 / 4.69
Circuit Limits 313.70 / 209.20
Mkt. Cap. Full / Free
Float (Cr.) 1,00,900 / 35,315
(in Cr.) Jun-12 Mar-12 FY11-12
Revenue 10,980.60 10,757.20 41,603.80Net Profit 1,470.00 1,574.30 5,730.00EPS 3.87 4.15 15.09Cash EPS 8.22 8.19 30.67OPM % 35.19 34.36 34.30NPM % 13.39 14.63 13.77
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RelianceCommunications
52 Weeks H/L 109.7/46.7
Day's High / Low 65.30 / 63.60
Previous Close / Open 63.75 / 64.70
Wtd. Avg Price 64.51
Total Traded Value (Cr.) 7.49
TTQ / 2W Avg Q (Lakh) 11.61 / 33.49
Circuit Limits 76.50 / 51.05
Mkt. Cap. Full / FreeFloat (Cr.)
13,261 / 4,641(in Cr.) Jun-12 Mar-12 FY11-12Revenue 2,616.00 2,645.00 11,110.00Net Profit -252.00 804.00 156.00
EPS -1.22 3.90 0.76Cash EPS 1.14 6.35 9.19OPM % 27.18 65.22 28.45NPM % -9.63 30.40 1.40
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Stabilization and Decline StageOccurs due to various reasons such
as Change in Social Habits Government Regulations
Improved Technology Labour Cost
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The Business Cycle and
Industry Sectors Economic trends can and do affectindustry performance
By identifying and monitoring keyassumptions and variables, we canmonitor the economy and gauge the
implications of new information onour economic outlook and industryanalysis
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The Business Cycle and
Industry Sectors Cyclical or Structural Changes Cyclical changes in the economy arise
from the ups and downs of the businesscycle
Structure changes occur when theeconomy undergoes a major change inorganization or how it functions
Rotation strategy is when one switches fromone industry group to another over the courseof a business cycle
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The Business Cycle and
Industry Sectors Economic Variables and DifferentIndustries
Inflation Interest Rates
International Economics
Consumer Sentiment
Th St k M k t d
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The Stock Market andthe Business Cycle
Th St k M k t d
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The Stock Market andthe Business Cycle
trough
peak
Th St k M k t d
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The Stock Market andthe Business Cycle
Financial
Stocks Exceltrough
peakConsumerDurables
Excel
cars , PC,
Refrigerator
Capital Goods
Excel Machine
tools, airplane,
equipment
Basic
Industries
Excel oil ,
metal, timber
ConsumerStaples Excel
Pharma,
Food
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Performance of the BANKEX: During the period between 1 Jan 2002 and 13 June 2003, the total
market capitalization of BANKEX stocks has increased from 22970 cr.to 55283 cr. while the total market capitalization of BSE TECk indexstocks has fallen from 105956 cr. to 80787 cr. and that of FMCGIndex stocks from 87637 cr. to 75947 cr. During this period,
BANKEX rose by 62 percent showing impressive gains among othermajor indices. The average daily volatility of BANKEX from itsinception to date has been 1.38% as compared to 2.24% for BSE TECkand 1.06% for BSE FMCG Index for the same period.
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Quantitative Aspects of IndustryAnalysis
Competition Product Differentiation;Absolute Cost Advantage; Economies ofScale
Industry
Competitors
Rivalry Among
Them
Potential Entrants
Sellers Buyers
Substitutes
Threat of New Entrants
Threat of Substitute Products
BargainingPower of
Buyers
BargainingPower of
Sppliers
Porters 5 Force Model
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Structural Economic Changes andAlternative Industries
Social Influences Demographics
Lifestyles
Technology Politics and regulations
Economic reasoning
Fairness Regulatory changes affect numerous
industries
Regulations affect international commerce
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Analysis of Industry
CompetitionCompetition and Expected IndustryReturns Porters concept of competitive strategy is
described as the search by a firm for afavorable competitive position in an industry
To create a profitable competitive strategy,a firm must first examine the basic
competitive structure of its industry The potential profitability of a firm isheavily influenced by the profitability of itsindustry
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Competitive Structure of
an Industry Porters Competitive Forces Rivalry among existing
competitors Threat of new entrants
Threat of substitute products Bargaining power of buyers
Bargaining power of suppliers
Estimating Industry Rates of
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Estimating Industry Rates ofReturn
Present value using required rate of return for theequity in the industry
Two-step P/E ratio approach uses expected value at theend of investment horizon and compute the expected
dividend return during the period Valuation using the reduced form DDM
gk
DPi
1Pi = the price of industry i at time tD
1= the expected dividend for industry i in period 1 equal
toD0(1+g)
k = the required rate of return on the equity for industry i
g = the expected long-run growth rate of earnings and
dividend for industry i
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Estimating the Required Rate
of Return Influenced by the risk-free rate Expected inflation rate
Risk premium for the industry versus the market
business risk (BR)
financial risk (FR)
liquidity risk (LR)
exchange rate risk (ERR) country political risk (CR)
stimating t e xpecte Growt
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stimating t e xpecte GrowtRate
Earnings and dividend growth are determinedby the retention rate and the return onequity
Earnings retention rate of industrycompared to the overall market
Return on equity is a function of
the net profit margin total asset turnover a measure of financial leverage
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Industry Valuation Using the Free CashFlow to Equity (FCFE) Model
FCFE is defined as follows:Net income
+ Depreciation
- Capital expenditures- D in working capital
- Principal debt repayments
+ New debt issues
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Industry Valuation Using the Free
Cash Flow to Equity (FCFE) Model The Constant Growth FCFE Model
The Two-Stage Growth FCFE Model
gkFCFEV
1
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The Earnings Multiple Technique Estimating earnings per share
start with forecasting sales per share Industrial life cycle Input-output analysis Industry-aggregate economy relationship
earnings forecasting and analysis ofindustry competition competitive strategy competitive environment
industry operating profit margin industry earnings estimate industry earnings multiplier
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Industry Profit Margin Forecast
Industrys operating profit margin(EBITDA / Sales)
Depreciation expense
interest expense
tax rate
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Quantitative Aspects of
Industry Analysis Historical Performance Government Regulations
Labour Conditions Performance
External Shocks
Financial Issues Industry Share Price Valuation
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Quantitative Aspects of
Industry Analysis End use Analysis - Technique used toidentify sources of demand for anindustrys products or services and howdemand is going to change for each user
Ratio Analysis It divides dates byaggregate economic data over a periodof time and examines the result fortrends
Regression and correlation Analysis determines relationship between two ormore variables whereas correlationanalysis determines the degree to which
two variables are related to one another
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Industry Profit Margin Forecast
Depreciation expense Generally increasing time series
Specific estimate technique using the
depreciation expense/PE ratio Subtract depreciation from operating
profit margin to determine industrys net
before interest and taxes
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Industry Profit Margin Forecast
Interest expense is a function of financial leverageand interest rates
1. Calculate the annual total asset turnover (TATO)
2. Use your current sales estimate and an estimateof TATO to estimate total assets next year
3. Calculate the annual long-term (interest bearing)debt as a percent of total assets,
4. Estimate long-term debt for the next year
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Industry Profit Margin Forecast
Interest expense (cont.)5. Calculate the annual interest cost as apercent of long-term debt and analyze the
trend6. Estimate next years interest cost ofdebt for this industry based upon yourprior estimate of market yields
7. Estimate interest expense based on thefollowing estimates: (Interest Cost ofDebt) (Outstanding Long-Term Debt)
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Industry Profit Margin Forecast
Tax rate Regression analysis
Time series plot
After estimating the tax rate, multiply the EBTper share value by (1 - tax rate) to estimateearnings per share
Derive an estimate of industrys net profit
margin as a check on your EPS estimate
stimating an In ustry arnings
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stimating an In ustry arningsMultiplier
Macroanalysis relationship between multiplier for theindustry and the market
variables that influence the multiplier: required rate of return (k)
function of the nominal risk-free rate plus arisk premium
expected growth rate of earnings anddividend
dividend payout ratio
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Estimating an Industry Earnings
Multiplier Microanalysis Estimate the variables that influence the industry
earnings multiplier and compare them to the
comparable values for the market P/E Industry multiplier versus the market multiplier Comparing dividend-payout ratios Estimating the required rate of return (k)
Estimating the expected growth rate (g)g = Retention Rate (b) X Return on Equity (ROE)= (b) X (ROE)
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Simple Linear Regression
Linear regression analysis establishes arelationship between a dependent variableand one or more independent variables.
In simple linear regression analysis there
is only one independent variable. If the data is a time series, the
independent variable is the time period.
The dependent variable is whatever wewish to forecast.
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Simple Linear Regression Regression Equation
This model is of the form:
Y = a + bX
Y = dependent variable
X = independent variablea = y-axis intercept
b = slope of regression line
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Simple Linear Regression
Constants a and bThe constants a and b are computedusing the following equations:
2
2 2
x y- x xya =
n x -( x)
2 2
xy- x yb =
n x -( x)
n
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Simple Linear Regression Once the a and b values arecomputed, a future value of X can be
entered into the regression equationand a corresponding value of Y (theforecast) can be calculated.
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Example: Share Price
ABC Ltd. Simple Linear RegressionPrice of the share has grown steadilyover the past six years, as evidenced below. Use timeseries regression to forecast the price for the next three
years.
Price PriceYear (1000s) Year (1000s)
1 2.5 4 3.22 2.8 5 3.33 2.9 6 3.4
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Example: ABC Price Simple Linear Regression
x y x2 xy1 2.5 1 2.52 2.8 4 5.63 2.9 9 8.74 3.2 16 12.8
5 3.3 25 16.56 3.4 36 20.4Sx=21 Sy=18.1 Sx2=91 Sxy=66.5
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Simple Linear Regression
Y = 2.387 + 0.180X
2
91(18.1) 21(66.5)
2.3876(91) (21)a
6(66.5) 21(18.1)0.180
105
b
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Simple Linear Regression
Y7 = 2.387 + 0.180(7) = 3.65 or 3,650 students
Y8 = 2.387 + 0.180(8) = 3.83 or 3,830 studentsY9 = 2.387 + 0.180(9) = 4.01 or 4,010 students
Note: Enrollment is expected to increase by 180students per year.
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Simple Linear Regression Simple linear regression can also beused when the independent variable
X represents a variable other thantime.
In this case, linear regression isrepresentative of a class offorecasting models called causalforecasting models.
ff f
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Coefficient of
Correlation (r) The coefficient of correlation, r, explains therelative importance of the relationship betweenx and y.
The sign of r shows the direction of therelationship.
The absolute value of r shows the strength ofthe relationship.
The sign of r is always the same as the sign ofb.
r can take on any value between 1 and +1.
ff f
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Coefficient of
Correlation (r) Meanings of several values of r:-1 a perfect negative relationship (as xgoes
up, ygoes down by one unit, and vice versa)+1 a perfect positive relationship (as xgoes up,ygoes up by one unit, and vice versa)
0 no relationship exists between xand y
+0.3 a weak positive relationship-0.8 a strong negative relationship
ff f
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Coefficient of
Correlation (r) r is computed by:
2 2 2 2( ) ( )
n xy x yr
n x x n y y
C ffi i f
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Coefficient of
Determination (r2
) The coefficient of determination, r2,is the square of the coefficient of
correlation. The modification of rto r2 allows usto shift from subjective measures ofrelationship to a more specificmeasure.
r2 is determined by the ratio ofexplained variation to total variation:
2
2
2( )( )Y yry y