Bank Loan.

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Problem:

To study the Effect on Household income of Age, Level of education, Years

with current employer and Years at current address.

Hypothesis:

H1: Effect on Household income of Age, Level of education, Years with current
employer and Years at current address.

Variables:

Dependent Variables:

Household income

Independent Variables:

Age in years

Level of education

Years with current employer

Years at current address

For Analysis of this problem we are using liner regression because in this
data dependent variable is one and its also a scale variable and data simple
size is > 30,

Before starting liner regression analysis we required to remove illness from

the data like, heteroscedasticity, multicollinearity and autocorrelation.

This data isnt a time series data so we dont required to check

autocorrelation.
Heteroscedasticity

After analyzing the scatter plot, its shows the pattern, its mean
heteroscedasticity is present in the model and we dont have further
independent variables to include in model to remove heteroscedasticity.

Its misspecified model, selected independent variables does not having the
capability of explaining the target variables.

Now we are reporting our model by mentioning that this model will partially
explain our target variables while major portion of target variables is still
unexplained.
Multicollinearity

Coefficientsa

Model Unstandardized Standardiz t Sig. Collinearity

Coefficients ed Statistics
Coefficients

B Std. Error Beta Toleranc VIF

e

(Constant) -27.977 4.902 -5.707 .000

Age in years .686 .164 .143 4.184 .000 .501 1.997

Level of education 12.693 1.026 .306 12.371 .000 .960 1.042

1 Years with current
3.361 .168 .591 19.948 .000 .667 1.499
employer

Years at current
.015 .169 .003 .086 .932 .637 1.569
address

a. Dependent Variable: Household income in thousands

The indentification of multicollinearity can be done through VIF (variance

inflation factor) values of variables in Collinearity Statistics table which
required to be <10

After examine the VIF values of all independent variable in Collinearity

Statistics table which is <10 we can say Multicollinearity doesnt exist in this
model.

After removing all the illness now we can report model of regression
Liner Regression Model Reporting:
1. Hypothesis Testing

H1: Effect on Household income of Age, Level of education, Years with

current employer and Years at current address.

ANOVAa

Model Sum of df Mean Square F Sig.

Squares

Regression 637042.617 4 159260.654 215.595 .000b

1 Residual 624203.764 845 738.703

Total 1261246.381 849

a. Dependent Variable: Household income in thousands

b. Predictors: (Constant), Years at current address, Level of education, Years with
current employer, Age in years

In this study we are using consolidated hypothesis, consolidated hypothesis

tested through ANOVA table.

Since Sig. value in anova table is <0.05, which refers to reject HO and it
conclude that Household income is affected by Age, Level of education, Years
with current employer and Years at current address is true.

2. Model Summary

Model Summaryb

Model R R Square Adjusted R Std. Error of the

Square Estimate

1 .711a .505 .503 27.17909

a. Predictors: (Constant), Years at current address, Level of education,

Years with current employer, Age in years

b. Dependent Variable: Household income in thousands

R (Strength of relationship)

71.1% Strong Strength of relationship is present among the dependent and

independent variables.
 R-Square (Coefficient of determination)

50.5% Proportionate amount of variation in the dependent

variable (household income) explained by the independent variables (Age,
Level of education, years with current employer and Years at current
address) in the linear regression model. The larger the R-squared is, the
more variability is explained by the linear regression model.

Adjusted R-Square

Our first indicator of generalizability is the adjusted R Square value, which is

adjusted for the number of variables included in the regression
equation. This is used to estimate the expected shrinkage in R Square.
For the problem we are analyzing, R Square = .505 and the Adjusted R
Square =.503. These values are very close, anticipating minimal shrinkage
based on this indicator.

Std. Error of the Estimate

It tells you how wrong the regression model is on average using the units of
the response variable. Smaller values are better because it indicates that the
observations are closer to the fitted line.

3. Model Construction

Coefficientsa

Model Unstandardized Standardiz t Sig. Collinearity

Coefficients ed Statistics
Coefficients

B Std. Error Beta Toleranc VIF

e

(Constant) -27.977 4.902 -5.707 .000

Age in years .686 .164 .143 4.184 .000 .501 1.997

Level of education 12.693 1.026 .306 12.371 .000 .960 1.042

1 Years with current
3.361 .168 .591 19.948 .000 .667 1.499
employer

Years at current
.015 .169 .003 .086 .932 .637 1.569
address

a. Dependent Variable: Household income in thousands

 General Model

Y= + 1X1 + 2X2 + 3X3 + 4X4 + e

Miss specified Model

Y= + 1 (Age) + 2 (Education) + 3 (current employer) + 4 (current

Address) + e

Expected Model

Y = -27.977 + (.686) (Age) + (12.693) (Education) + (3.361) (current employer) +

(.015) (current Address)

Final Model

Household income = (.686) (Age) + (12.693) (Education) + (3.361) (current

employer) + (.015) (current Address)

Current Household income will become 0 if all the independent vanishes.

Household income will increase by 0.686$ if Age will increase by 1

year.
Household income will increase by 12.693$ if Education Level will
increase by 1 Class.
Household income will increase by 3.361$ if Years with current
employer will increase by 1 year.
Household income will increase by 0.015$ if Years at current address
will increase by 1 year.

Years with current employer is formed most effective 59% on our target
variable Household income followed by Level of education (31%), Age in
years (14%) and Years at current address (0.3%)