INVESTIGATING A BUSINESS PROBLEM THROUGH THE APPLICATION OF REGRESSION ANALYSIS
This paper presents the summary results and the conclusion drawn from the results of the investigation of a business problem. The problem was investigated through the application of regression analysis.
The business problem addressed in this paper is associated with the residential mortgage business (the business with which this writer is associated). The housing market in the United States has been increasing in both volume and sales values for more than two years. Concerns have been expressed that the nation may be experiencing a "housing bubble" that may break at any time. Informed opinions on the issue vary widely. The disagreement itself adds to the level of uncertainty concerning the near future of the residential mortgage market. The level of uncertainty increased further in the aftermath (which continues) of Hurricane Katrina. Some informed opinion holds that negative impacts on the economy will hit the housing market hard. Opposing this view is the position of others who contend that the rebuilding in the wake of the disaster will allow the housing boom to continue.
Companies operating in the residential mortgage market need to project what changes are likely to occur in the market over the coming 18 months. A decision was made to investigate the problem through the application of regression analysis to appropriate data.
After investigation of the types of data that would be appropriate for such an analysis, a decision was made to regress changes in residential mortgage originations stated as a percent against changes in gross domestic product (GDP) stated as a percent. Data were collected from the Federal Reserve Bank of Philadelphia (2005) and the Economic and Statistics Administration of the United States Department of Commerce (2005) in relation to GDP for the inclusive period January 1990 - June
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