1. Jacek Wallusch _________________________________ Statistics for International Business Lecture 12: Correlation

2. Getting Started ____________________________________________________________________________________________ Statistics: 12 definitions Webster’s New World College Dictionary Correlation: 1. Mutual relationship or connection. 2. The degree of relative correspondence. Causality: 1. Causal quality or agency. 2. The interrelation of cause and effect. do not confuse causality with correlation

3. Covariance ____________________________________________________________________________________________ Statistics: 11 formula Notice that Excel function calculates the population covariance Sample: Population: association positive value of covariance – positive linear association between x and y; association negative value of covariance – negative linear association between x and y;

4. Covariance ____________________________________________________________________________________________ Statistics: 11 interpretation Gender and unmeployment quadrant I and III – values of x i and y i greater than their means points located in I & III quadrants – positive COV points located in II & IV quadrants – negative COV

5. Correlation ____________________________________________________________________________________________ Statistics: 11 formula Pearson correlation coefficient: posible values of correlation coefficient: the closer the value of r xy to unity the closer the linear relationship between x and y

6. Correlation ____________________________________________________________________________________________ Statistics: 11 significance Testing for significance Hypothesis to be tested test statistic Calculate the critical value and p-value using the Excel function test statistic has a t distribution with T – 2 degrees of freedom