Essay on Correlation Analysis : Correlation Between Variables

941 Words Jun 7th, 2016 4 Pages
Correlation analysis is used to determine the degree of relationship between variables. In correlation it is assumed that the variables mutually influence each other (Sharma, 2005). Baker and Saltes (2005) used a correlation to test capability of ABI for forecasting CS sectors and then used regression analysis’s coefficient of determination (R2) to indicate the proportion of the variance of CS that is explained by ABI. They found that non-residential CS is highly correlated with ABI in lag 5 for overall sector and 11 for commercial/industrial sector. they concluded that ABI can be used for forecasting CS as a leading indicator. They pointed out that formal structural models are needed to improve the accuracy of CS forecast.
Baker, Chu, & Riskus (2014) introduced “Design Contracts” as a new leading indicator to help forecating CS. The design contracts includes information about changes in inquiries for new works including bids and requests for proposals. AIA collects data on design contracts form October 2010. They concluded that this indicator provides earlier insignt into future dedign and construction activities.
There are some studies regarding forecasting of CS. None of these studies did use explanatory variables for forecasting. AIA consensus forecast is based on qualitative methods that its results are subject to errors. Furthermore, correlation and regression can not be used to designate the cause and effect relationships and it requires empirical test (Abraham &…

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