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Individual Assignment – Regression Case
The risk manager for Big Mac is undertaking a comprehensive analysis of the workers’ compensation injury claims for the firm’s U.S. operations. She has collected monthly data over the last three years with regard to workers’ compensation claims and several other items that she feels may be helpful in predicting future claims.
You are a consultant with a risk management consulting firm specializing in detailed quantitative analysis of problems facing corporate risk managers. Your firm has been retained by Big Mac to perform a comprehensive regression analysis of its workers’ compensation claims.
The data provided to you by Big Mac consists of the following information stored in the file data.XLS.
Variable Name Description of Variable
CLAIMS The number of workers’ compensation injury claims.
MALE The proportion of the work force that is male.
SAFETY The dollar amount of expenditures on safety programs in thousands.
SALES The dollar amount of gross sales in millions.
PARTTM The proportion of the work force that is part-time.
EMPLOYS The number of employees in thousands.
Before you start, please make sure you understand the underlying analytical techniques that you are using (regression analysis). In your written report, please address all of the following points and/or recommendations to the risk manager at Big Mac:
1. Before looking at the data, please use intuition to describe each variable’s probable predictive power and direction of relationship with CLAIMS.
2. Calculate and analyze the correlation matrix. Explain some of the more significant correlations between the independent variables and CLAIMS, as well as between the independent variables themselves. Please make sure to include in your report the correlation
table you obtain from Excel.
3. Perform a comprehensive regression analysis for CLAIMS. This includes calculation and analysis of coefficients, p-values (or t-values), coefficients of determination (R
2), etc. Please make sure to include in your report the regression output from Excel including the following: Regression Statistics including R Square, Adjusted R Square, Standard Errors; as well as coefficient, standard error, p-value and t stat for all explanatory/independent variables.
4. Identify and describe the model (i.e., which independent variables should be included – a hint here, not all variables are necessarily needed, pending on statistical significance) that you feel best predicts CLAIMS. Justify the selection of this model from both conceptual and statistical viewpoints. This includes a statement of the identified model that a “non-statistician” could understand.
5. Is there an alternative model that is almost as good as your first choice as identified in your answer to number 4? If so, describe it.
6. State several managerial recommendations that you would make based on the model identified in number 4.
>REGRESS
0
.5 0
80 4
80 0
0
80 80 0
1
80 0
80 0
90 0
90 0.000 240 0
.839
90 90 6
0
90 0
220 105 0
105 105 4
0
105 105 120 120 120 120 120 135 135 135 135 135 13.741 145 329 333 360 160 Due date: 10:00 PM Sunday Oct. 20, 2013 (No late submissions will be accepted) Individual Assignment – Regression Case The risk manager for Big Mac is undertaking a comprehensive analysis of the workers’ You are a consultant with a risk management consulting firm specializing in detailed The data provided to you by Big Mac consists of the following information stored in the file Variable Name Description of Variable CLAIMS The number of workers’ compensation injury claims. MALE The proportion of the work force that is male. SAFETY The dollar amount of expenditures on safety programs
SALES The dollar amount of gross sales in millions.
PARTTM The proportion of the work force that is part-time.
EMPLOYS The number of employees in thousands.
Before you start, please make sure you understand the underlying analytical techniques that 1. Before looking at the data, please use intuition to describe each variable’s probable predictive
power and direction of relationship with CLAIMS. 2. Calculate and analyze the correlation matrix. Explain some of the more significant
correlations between the independent variables and CLAIMS, as well as between the table you obtain from Excel. 3. Perform a comprehensive regression analysis for CLAIMS. This includes calculation and
analysis of coefficients, p-values (or t-values), coefficients of determination (R2), etc. Please
4. Identify and describe the model (i.e., which independent variables should be included – a hint
here, not all variables are necessarily needed, pending on statistical significance) that you feel
5. Is there an alternative model that is almost as good as your first choice as identified in your
answer to number 4? If so, describe it. 6. State several managerial recommendations that you would make based on the model
identified in number 4.
PERIOD
PARTTM
MALE
SALES
EMPLOYS
SAFETY
CLAIMS
1
0.
20
0.
5
25
4
8
4.
6
10
18
2 0.200
0.50
9
10.448
8.604
16
3
0.
22
0.601
5.598
0.000
20
7
4 0.220
0.547
6.0
19
7.978
166
5
0.
23
0.645
2.
11
1.9
33
201
6
0.
24
0.692
3.8
15
3.6
30
191
7
0.250
0.474
10.723
90
6.746
204
8
0.
26
0.519
8.039
5.074
2
14
9
0.
27
0.522
3.957
10
0.
28
0.603
13
11.462
188
11 0.280
0.595
10.5
12
14.3
35
17
12
0.
29
0.505
4.576
18.583
145
13
0.
32
0.484
7.252
105
11.029
14
0.330
0.569
5.269
9.354
232
15
0.
34
0.542
15.503
7.177
243
16
0.350
0.541
9.525
14.780
21
17
0.
36
0.458
6.921
10.016
237
18
0.370
0.471
14.801
8.940
249
19
0.380
0.425
11.381
120
13.741
251
20
0.390
0.414
11.129
4.940
298
21
0.400
0.410
10.364
23.187
215
22 0.410
0.555
12.814
9.275
281
23
0.420
0.480
12.371
5.582
300
24
0.430
0.429
15.707
11.202
274
25
0.440
0.427
15.132
135
11.894
304
26
0.450
0.462
14.636
14.407
299
27
0.460
0.
329
16.993
14.258
295
28
0.470
0.454
16.179
7.374
3
31
29 0.470
0.436
19.858
16.141
285
30 0.480
0.247
21.200
7.475
333
31 0.480
0.419
17.854
140
312
32
0.490
0.459
23.358
13.664
321
33 0.490
0.319
18.892
150
12.683
34
0.500
0.422
22.224
155
14.503
35 0.500
0.383
23.571
160
12.877
36 0.500
0.318
19.690
24.507
302
Format of submission: electronic submission via Blackboard assignment submission
Total points: 50 points
Note: this is an individual assignment and no collaboration is allowed.
compensation injury claims for the firm’s U.S. operations. She has collected monthly data over the
last three years with regard to workers’ compensation claims and several other items that she feels
may be helpful in predicting future claims.
quantitative analysis of problems facing corporate risk managers. Your firm has been retained by
Big Mac to perform a comprehensive regression analysis of its workers’ compensation claims.
data.XLS.
in thousands.
you are using (regression analysis). In your written report, please address all of the following points
and/or recommendations to the risk manager at Big Mac:
independent variables themselves. Please make sure to include in your report the correlation
make sure to include in your report the regression output from Excel including the following:
Regression Statistics including R Square, Adjusted R Square, Standard Errors; as well as
coefficient, standard error, p-value and t stat for all explanatory/independent variables.
best predicts CLAIMS. Justify the selection of this model from both conceptual and
statistical viewpoints. This includes a statement of the identified model that a “non-
statistician” could understand.
