Model Analysis/Reduction
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Step 1: Select Predicting Variables
Step 2: Remove Outliers
Methodology:
Methodology:
• Conducted a correlation analysis to identify 'independent' clusters among the 114 factors. • Determined 5 independent clusters for the initial model framework • Run forward stepwise regression to see which predicting variables are insignificant
• Utilize Cook's Distance to pinpoint influential points in the dataset. • Establish a threshold for Cook's Distance ( 𝐷 𝑖 ) such that data points with 𝐷 𝑖 > 4 𝑛 (where 𝑛 is the sample size) are classified as outliers. • Remove identified outliers from the dataset to mitigate the risk of skewed analysis results.
Note: Clusters may vary by industry group, which will be considered in subsequent analyses.
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