19-1

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 19-2

Learning Objectives

Understand . . .
‡ how correlation analysis may be applied to
study relationships between two or more
variables
‡ uses, requirements, and interpretation of
the product moment correlation coefficient
‡ how predictions are made with regression
analysis using the method of least squares
to minimize errors in drawing a line of best
fit
 19-3

Learning Objectives

Understand . . .
‡ how to test regression models for linearity
and whether the equation is effective in
fitting the data
‡ nonparametric measures of association
and the alternatives they offer when key
assumptions and requirements for
parametric techniques cannot be met

Exhibit 19-1 Measures of
Association: Interval/Ratio
Pearson correlation coefficient
Correlation ratio (eta)
Biserial
Partial correlation
Multiple correlation
Bivariate linear regression
19-4
For continuous linearly related
variables
For nonlinear data or relating a main
effect to a continuous dependent
variable
One continuous and one dichotomous
variable with an underlying normal
distribution
Three variables; relating two with the
third¶s effect taken out
Three variables; relating one variable
with two others
Predicting one variable from another¶s
scores
 19-5

Exhibit 19-1 Measures of

Association: Ordinal
Based on concordant-discordant pairs;
Gamma proportional reduction in error (PRE)
interpretation

Kendall¶s tau b P-Q based; adjustment for tied ranks

P-Q based; adjustment for table

Kendall¶s tau c
dimensions

P-Q based; asymmetrical extension of

Somers¶s d
gamma

Product moment correlation for ranked

Spearman¶s rho
data
 19-6

Exhibit 19-1 Measures of

Association: Nominal

Phi Chi-square based for 2*2 tables

CS based; adjustment when one table
Cramer¶s V
dimension >2
CS based; flexible data and distribution
Contingency coefficient C
assumptions

Lambda PRE based interpretation

PRE based with table marginals

Goodman & Kruskal¶s tau
emphasis
Uncertainty coefficient Useful for multidimensional tables

Kappa Agreement measure

 19-7

Relationships

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 å

üavid Singleton,
Vice President of Insights,
Zyman Marketing Group
 19-8

Pearson¶s Product Moment

Correlation 

Is there a relationship between X and Y?

What is the magnitude of the relationship?

What is the direction of the relationship?

 19-9

Exhibit 19-2 Scatterplots of

Relationships
 19-10

Exhibit 19-4 Scatterplots

 19-11

Exhibit 19-7 üiagram of

Common Variance
 19-12

Interpretation of
Correlations

X causes Y

Y causes X

X and Y are activated by

one or more other variables

X and Y influence each

other reciprocally
 19-13

Exhibit 19-8
Artifact Correlations
 19-14

Interpretation of
Coefficients

2
  


 
 

 

 















.
 19-15
Exhibit 19-9 Comparison of
Bivariate Linear Correlation
and Regression
 19-16

Exhibit 19-10 Examples of

üifferent Slopes
 19-17

Concept Application

X Y
Average Temperature Price per Case
(Celsius) (FF)
12 2,000

16 3,000

20 4,000

24 5,000

Mean =18 Mean = 3,500

 19-18

Exhibit 19-11 Plot of Wine

Price by Average Temperature
 19-19

Exhibit 19-12 üistribution of

Y for Observation of X
 19-20

Exhibit 19-14 Wine Price

Study Example
 19-21

Exhibit 19-15 Least Squares

Line: Wine Price Study
 19-22

Exhibit 19-16 Plot of

Standardized Residuals
 19-23

Exhibit 19-17 Prediction

and Confidence Bands
 19-24

Testing Goodness of Fit

Y is completely unrelated to X
and no systematic pattern is evident

There are constant values of

Y for every value of X

The data are related but

represented by a nonlinear function
 19-25

Exhibit 19-18 Components

of Variation
 19-26

Exhibit 19-19
0 Ratio in Regression
 19-27

Coefficient of
üetermination: 

Total proportion of variance in Y

explained by X
üesired : 80% or more
 19-28

Exhibit 19-20 Chi-Square

Based Measures
 19-29
Exhibit 19-21
Proportional Reduction of
Error Measures
 19-30
Exhibit 19-22 Statistical
Alternatives for Ordinal
Measures
 19-31
Exhibit 19-23 Calculation of Concordant (),
üiscordant ( ), Tied (ww), and Total
Paired Observations:
Keyüesign Example
 19-32

Exhibit 19-24 KüL üata for

Spearman¶s Rho
ââââââââââââ
âââââââââââââââ

 
ë 
 



1 3.5 6.0 -2.5 6.25
2 10.0 5.0 5.0 25.00
3 6.5 8.0 -1.5 2.52
4 2.0 1.5 .05 0.25
5 1.0 3.0 -2 4.00
6 9.0 7.0 2.0 4.00
7 3.5 1.5 2.0 4.00
8 6.5 9.0 -2.5 6.25
9 8.0 10.0 -2 4.00
10 5.0 4.0 1.0 _1.00_
57.00 .
 19-33

Key Terms

‡ Artifact correlations ‡ Phi

‡ Bivariate correlation ‡ Coefficient of
analysis determination (r2)
‡ Bivariate normal ‡ Concordant
distribution ‡ Correlation matrix
‡ Chi-square-based ‡ üiscordant
measures ‡ Error term
‡ Contingency ‡ Goodness of fit
coefficient C
‡ lambda
‡ Cramer¶s V
 19-34

Key Terms

‡ Linearity ‡ Pearson correlation

‡ Method of least coefficient
squares ‡ Prediction and confidence
‡ Ordinal measures bands
‡ Gamma ‡ Proportional reduction in
‡ Somers¶s d error (PRE)
‡ Spearman¶s rho ‡ Regression analysis
‡ tau b ‡ Regression coefficients
‡ tau c
 19-35

Key Terms

‡ Intercept ‡ Scatterplot
‡ Slope ‡ Simple prediction
‡ Residual ‡ tau