Plot the residuals against the predicted value of y and comment on what this plot means relative to the aptness of the model.
a. Compute the standardized residuals and form these in a frequency histogram. What does this indicate about the normality assumption?
b. Comment on the overall aptness of this model and indicate what might be done to improve the model.
The J. J. McCracken Company has authorized its marketing research department to make a study of customers who have been issued a McCracken charge card. The marketing research department hopes to identify the significant variables that explain the variation in purchases. Once these variables are determined, the department intends to try to attract new customers who would be predicted to make a high volume of purchases.
Twenty-five customers were selected at random, and values for the following variables were recorded in the file called McCracken:
y = Average monthly purchases 1 in dollars 2 at McCracken
x1 = Customer age
x2 = Customer family income
x3 = Family size