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Automobile Sales and the General Economy ECON240A. Group #1 Deepti Goyal Rory Tyler Hofstatter Hairuo Hu Joel Benjamin Lindenberg Sooyeon Angela Shin Michael John Stromberg Kathy Zha Ling Zhu. Introduction. Dependent Variable Amount of Auto Sales Independent Variables Unemployment
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Automobile Sales and the General EconomyECON240A Group #1 Deepti Goyal Rory Tyler Hofstatter Hairuo Hu Joel Benjamin Lindenberg Sooyeon Angela Shin Michael John Stromberg Kathy Zha Ling Zhu
Introduction • Dependent Variable • Amount of Auto Sales • Independent Variables • Unemployment • Price of Oil • Average Mileage per Gallon • Income per Capita
Trend towards vehicles with better fuel efficiency • Automobile sales have been decreasing, particularly for bigger vehicles notably in the past couple of years • Impact of current recession on the auto sales industry Why Study Such Variables?
Exploratory Data Analysis • Histograms • Box Plots • Scatter Diagram • Time Series Trend • Regression Analysis • Correlation Diagram • Bi-variate Regression using OLS method • Normality test using Jarque-Bera Statistics • Heteroskedasticity How the Study is Conducted
Auto Sales: Ward’s Automotive Group • Unemployment Rate: • US Bureau of Labor Statistics • Annual Crude Oil Prices: • US Bureau of Labor Statistics • Income per Capita: • US Department of Commerce, • Bureau of Economic Analysis • 35 Years (1974-2008) Data Gathering
Negative Slope! Correlation – Auto Sales and Other Variables
Auto Sales = c1*Avgmpg + c2*Income+c3*oilprice + c4 * Unemployment + constant Regression Equation
Barely Significant at 5% level All other variables are significant at 5% level Highly Significant F-statistic Regression I
Residual vs. Fitted Values Slightly skewed to the left But still normally distributed Diagnostic of Regression I
White Heteroskedasticity test: F-statistics 1.409723 Probability 0.239025 Obs*R-squared 10.58868 Probability 0.226112 Heteroskedasticity?
All variables are significant at 5% level with income as highly significant Highly Significant F-statistic Regression II
Significant Factors Affecting Automobile Sales: • Unemployment Rate • Income per Capita • Fuel Economy (Avg. Mileage per Gallon) • Avg. Price of Crude Oil • Forecasting • Automobile Sales , when unemployment rate and income per capita . • Room for Future Studies: • For stronger R2 (0.74 for Reg. #1 and 0.69 for Reg. #2), additional variables should be studied Conclusion