In: Economics
1.For a certain data set, r=0.57. Say whether the following statements are true or false and explain.
a.There are no outliers
b.There is anon-linear association.
2.True/False: average values of x correspond to above average values of y. Explain.
Let's assume that there are two variables in the dataset x and y between which we have been given the correlation coefficient (r = 0.57).
Correlation coefficient of magnitude between 0.5 and 0.7 are considered as moderately correlated.
a. False, Note that irrespective of the r or correlation coefficient, outliers can be present in the data set. Even if correlation coefficient is 0.9, although the two variables are strongly correlated, there can still be some of the data points which are far away from majority of the data points in the data set.
b. False, we can't be sure of kind of association be just looking at correlation coefficient. Note that, although the two variables are moderately correlated, but the association can be either of linear or non- linear nature. Once we plot the data points on the graph, then only looking at kind of trend we get one can be sure of the linear or non-linear association.
c. False, Average values of x may or may not correspond strongly with each other given the correlation between the two variables is moderate.