Develop a correlation matrix for the data in Table 1. Comment on the values in your matrix and whether there are any concerns in using these variables in Venus’ multiple regression model.
Managerial Decision Making
Mr. Aristotle is a Vice President at Bayou City Real Estate Investment Trust and he has presented a proposal to the board to consider an investment of $200 million in the Houston market.
2019 $1,176 8.59% 39.92% 102,593.00 $305,959 $245,000 56.99 3.8
2018 $1,150 9.49% 39.70% 98,323.00 $298,982 $237,500 64.94 4.4
2017 $1,091 9.73% 39.26% 94,818.00 $291,340 $229,900 50.80 5.0
2016 $1,084 7.28% 40.83% 91,530.00 $283,133 $221,000 43.29 5.3
2015 $1,069 6.46% 41.33% 88,764.00 $280,290 $212,000 48.66 4.6
2014 $1,020 7.13% 40.94% 91,439.00 $270,182 $199,000 93.17 5.0
2013 $964 8.39% 39.87% 88,080.00 $248,591 $180,000 97.98 6.1
2012 $956 10.17% 38.65% 74,116.00 $225,330 $164,500 94.05 6.6
2011 $941 11.64% 38.44% 63,606.00 $213,723 $155,000 94.88 8.1
2010 $961 13.76% 37.16% 61,005.00 $211,765 $153,990 79.48 8.3
2009 $984 12.27% 37.74% 63,803.00 $203,626 $153,000 61.95 7.5
2008 $971 12.55% 36.63% 69,336.00 $208,266 $152,000 99.67 4.8
2007 $924 13.57% 36.12% 83,736.00 $206,393 $152,000 72.34 4.3
2006 $913 10.91% 36.52% 87,574.00 $198,410 $149,079 66.05 5.1
Questions:
1. Review the regression output in Table 2 and provide your critique of the results. What are your concerns about Venus’ model?
2. Use the data in Table 1 to recreate the regression results in Table 2.
3. Develop a correlation matrix for the data in Table 1. Comment on the values in your matrix and whether there are any concerns in using these variables in Venus’ multiple regression model.
4. Based on your correlation results, what one (1) variable regression model would give you the best model from among the seven (7) parameters chosen by Venus? Build a 1-variable regression model with this variable, write out your equation, and comment on the results.
5. Perform a step-wise regression to reduce the number of independent variables and produce a final regression model. Write out the forecast equation for your final model.
6. Now that you have a final model, present a pitch as to why your model is better than Venus’ model and whether Bayou City should use your model to invest in the Houston market.