An assessment of the adequacy of a fitted regression model – the residual examination approach

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Abstract

An assessment of the adequacy of a fitted regression model – the residual examination approach. The aim of this study was to examine the fitness of a regression model through the assessment of its residual. The study examined how sales volume can be influenced by the amount spent on advertising products or services. Using the regression approach, data sourced from De-Legit Hotels were analyzed. The result of the study indicated that as found by previous studies, the effect of advertisement is significantly related to sales increment. De-Legit Hotels often advertise events on which it spends money on, on analyzing the relationship the study found that the sales volume will increase significantly by 0.34 units when an advertisement advert is done. Ti further verifies the aptness of this estimated model, the residual analysis was conducted and the result indicated that the assumptions of regression analysis was not violated and coupled with the R-square, we found that the result is optimal enough for prediction. The study concluded that residual analysis was efficient in examining the efficiency and adequacy of the fitted regression model, especially when compared with the R-square and the global F-test which both proved adequate in this study. Hence, an increase in the amount spent on the advertisement (covering a wider area of the population) of upcoming events will result to an increasing result in sales volume and this is believed to be very helpful in the decision-making process of the hotel.