1. Models and Data: Procedure Selection
Jacek Wallusch _________________________________ Introduction to Data Analytics
Models and Data:
Procedure Selection

2. Procedure Selection ____________________________________________________________________________________________
models
Explaining Variable: continuous data
Example:
net prices (may vary, e.g. between £10- £15)
salaries
unit cost
sales volume
Procedure: ordinary least squares
Limitations:
possibly normal distribution of variables
no outliers
Probability distribution and uncertainty and risk – this topic will be reconsidered soon
CIMA
Data

3. Procedure Selection ____________________________________________________________________________________________
models
Explaining Variable: binary choice data
Example:
contract won/lost
special discount granted/not granted
Procedure: binary choice models
Popular Probability Distribution: logistic, standard normal
Limitations:
increasing heterogeneity
poor fit
Probability distribution and uncertainty and risk – this topic will be reconsidered soon
CIMA
Data 3

4. Procedure Selection ____________________________________________________________________________________________
models
Explaining Variable: ordinal choice data
Example:
clustered discounts ( = 1; = 2; above = 3)
ratings (not at all = 1, rather not = 2, rather yes = 3, definitely yes = 4)
Procedure: ordinal choice models
Popular Probability Distribution: logistic, standard normal
Limitations:
increasing heterogeneity
poor fit
Probability distribution and uncertainty and risk – this topic will be reconsidered soon
CIMA
Data 4

5. Procedure Selection ____________________________________________________________________________________________
models
Explaining Variable: count data (integer-valued data)
Example:
quantities sold
number of orders
Procedure: count choice models
Popular Probability Distribution: Poisson, negative binomial
Limitations:
increasing heterogeneity
poor fit
Probability distribution and uncertainty and risk – this topic will be reconsidered soon
CIMA
Data 5

6. Procedure Selection ____________________________________________________________________________________________
models
Explaining Variable: defined on a unit interval (fractions)
Example:
discounts
margin (%)
Procedure: beta-distribution choice models
Popular Probability Distribution: beta
Limitations:
increasing heterogeneity
poor fit
Probability distribution and uncertainty and risk – this topic will be reconsidered soon
CIMA
Data 6